Two recent cases out of the Michigan Court of Appeals address the legal standards for interpreting a trust agreement. In re Larry Berman Revocable Living Trust, Docket No. 364315 (Feb. 1, 2024); In re Thomas J. and Carol A. Williams Trust, Docket No. 365747 (Feb. 22, 2024).
Sometimes a trustee or the beneficiaries disagree on how a trust document should be interpreted after the death of the person who created the trust document (aka the settlor). When an interpretation dispute arises, the probate court should follow these interpretation principles:
- “The intent of the settlor is to be carried out as nearly as possible.”
- “In resolving a dispute concerning the meaning of a trust, a court's sole objective is to ascertain and give effect to the intent of the settlor.”
- “This intent is gauged from the trust document itself, unless there is ambiguity.”
- “If ambiguity exists, the court must look outside the document in order to carry out the settlor's intent, and may consider the circumstances surrounding the creation of the document and the general rules of construction.”
- “The interpretation of trust documents is governed by the same rules applicable to the interpretation of wills.”
- “A will or trust should be construed in its entirety, gathering its intent as expressed within the four corners of the instrument, not by emphasizing the wording of any isolated paragraph.” (Internal quotation marks and citation omitted.)
- The court “may not construe a clear and unambiguous will in such a way as to rewrite it, and, where possible, each word should be given meaning.”
- “The fact that litigants disagree regarding the meaning of a trust, however, does not mean that it is ambiguous.”
The Berman court also confirmed it is appropriate for the court to consider the dictionary definition of a word used in a trust document when an interpretation issue arises.
Finally, the Williams Trust case addressed these additional interpretation principles:
- “It is a well-established rule of construction that, if two clauses in a will are absolutely irreconcilable, the last prevails, as being the latest expression of the testator’s wishes.”
- “However, for the last to prevail, the language must be clear, decisive, and unequivocal, and be the last words of the testator upon the subject.” (Internal quotation marks omitted.)
The probate court’s analysis is specific to the trust document being interpreted. If you have questions about a probate or trust dispute, please contact Laura Morris at lmorris@wnj.com or 616.752.2407.
