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In Furman v. Gossels, Case No. 10-1603-BLS1, 2011 Mass. Super. LEXIS 84 (Super. Ct. May 24, 2011), a decision that was just recently reported, the Superior Court addressed a business dispute that turned on the nature of the rights held by a beneficiary of a trust.
Siblings Elaine, Jerome and Walter were the members of a limited liability company, with each owning a one-third interest. The operating agreement of the LLC provides that only descendants of the siblings' parents shall be members. The operating agreement also contains a restriction on the transfer of a membership interest, providing in part that a membership interest can be transferred only (1) to a descendant of the siblings' parents or (2) to a trust in which all of the beneficial interests are owned by another member or a descendant and the trustee of which is a member. If a membership interest is transferred to an impermissible transferee, then the operating agreement gives the LLC the right to purchase that interest at a discounted price.
When Walter died in 2010, his membership interest passed through his estate to a family trust. Under the terms of the trust, his widow Miriam disclaimed her interest in the LLC and declined to act as trustee. The result of these actions was that Walter's children, who (unlike Miriam) are descendants of the siblings' parents, became the beneficiaries of Walter's membership interest through the trust and Walter's daughter Rebecca became the trustee.
The question presented in the litigation was whether Rebecca holds an ownership interest in the LLC and thus is a member, fulfilling the requirement that a membership interest can be transferred only to a trust of which a member is the trustee.
Elaine and Jerome argued that the trust is an impermissible transferee of Walter's membership interest because Rebecca is not a member of the LLC. The Court disagreed, ruling that Rebecca and her siblings, as the beneficiaries of the trust, hold equitable interests in Walter's membership interest and thus are the "real owners." Accordingly, the trust is a permissible transferee because Rebecca, the trustee, is a member of the LLC.
The Court based its ruling on the following trust-law principles: "A trustee of a trust holds the legal title to trust property with the power to administer it for the benefit of the beneficiaries, in accordance with the terms of the trust instrument.... A beneficiary, on the other hand, is the owner of the trust res, has an equitable interest in the trust property, and is considered the real owner."
On January 13, Darian Butcher will moderate and Alisa Hacker will speak at the Boston Bar Association webinar, "Breach of Fiduciary Duty Litigation: Superior Court Versus Probate & Family Court."
Margaret Meehan, Tiana Gianopulos and Alexis Gettier collaborated on an article, "New Direction: The Connecticut Uniform Directed Trust Act" for the Quinnipiac Probate Law Journal.
Mark Romance authored an article, "Five Tips for Representing a Non-Party Served with a Document Subpoena: Welcome to the Party?," published by the American Bar Association Section of Litigation.
Mark A. Romance authored an article, "Five Tips for an Effective Mediation Statement," which was published by the American Bar Association, Section of Litigation.
Day Pitney Press Release
Day Pitney Press Release
Adam Myron, senior counsel resident in Day Pitney's West Palm Beach office, is running for judge in south Florida.
Darian Butcher and Alisa Hacker were appointed to the Boston Bar Association Virtual Hearing Resource Guides Probate Team.
Day Pitney's Michael Napoleone has been appointed to the Palm Beach County League of Cities board of directors.
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