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New Florida Bankruptcy Holding

The Law Offices of David A. Carter, P.A. recently prevailed in a bankruptcy case of first impression. The issue before the Court was whether the Trustee retains the power to amend a Debtor’s Trust following the death of the Debtor. The case cite and relevant information regarding the case are as follows:

United States Bankruptcy Court,
S.D. Florida,
Broward Division.
InreWilhelminaDUMFORD, Debtor.
No. 09-17414-BKC-RBR.

Nov. 17, 2009.

David A. Carter, Esq., Boca Raton, FL, for Debtor.


RAYMOND B. RAY, Bankruptcy Judge.

* THIS MATTER came before the Court for hearing on August 13, 2009, upon the Motion to Strike Trustee’s Notice of Amendment to the Wilhelmina D. Dumford Trust (the “Motion to Strike”) [D.E. 32], filed by the Debtor. The Court will grant the Motion to Strike.

Background and Procedural History

The facts of this case are undisputed. In or about 1996, the Debtor purchased a condominium in Pembroke Pines, Florida (the “Condo”), which she claimed as her homestead. On or about March 28, 2001, the Debtor executed the Wilhelmina D. Dumford Revocable Living Trust (the “Trust”) FN1 and the last Will and Testament of Wilhelmina D. Dumford. Schedule A of the Trust lists the Condo in a description of Trust property. Article Three of the Trust provides the Debtor with the power to revoke or amend the Trust “while [the Debtor is] living and competent.” Pursuant to Article Four of the Trust, the Debtor granted herself a life estate interest in the Condo.

FN1. A copy of the Trust is attached as Exhibit A to the Motion to Strike.

The Debtor filed a voluntary petition under chapter 7 of the Bankruptcy Code on April 22, 2009 (the “Petition”). On May 31, 2009, the Debtor died testate at the age of 88. On June 15, 2009, Chapter 7 Trustee Marika Tolz (the “Trustee”) filed the Notice of Filing Amendment to the Trust (the “Notice”) [D.E. 29]. The Notice states that the Trustee had amended the Trust so as to make the bankruptcy estate its sole beneficiary. The Debtor filed the Motion to Strike on June 30, 2009, and the Trustee filed a response thereto on August 10, 2009 [D.E. 38]. The parties filed a joint stipulation of facts on September 22, 2009 [D.E. 40]. Interested party Jean Dumford filed a further response to the Notice on November 10, 2009 [D.E. 55].

Conclusions of Law

The issue before the Court is whether the Trustee retains the power to amend the Trust following the death of the Debtor.

Pursuant to 11 U.S.C. § 541(a), the commencement of a bankruptcy case creates an estate. This estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case,” subject to certain exceptions. 11 U.S.C. § 541(a)(1) (2009). Upon the filing of the Petition, the power of the Debtor to revoke or amend the Trust thus became property of the estate. See Askanase v. Livingwell, Inc., 45 F.3d 103, 106 (5th Cir.1995) (“What comes to the bankruptcy estate is not only the property in which debtor has an interest, but also, the powers the debtor can exercise for its own benefit over property regardless of the title debtor may be acting under.”) (citation omitted).

Notwithstanding its broad scope, § 541(a)(1) limits property of the estate to those interests that the Debtor possesses at the commencement of the case. See Inhttp://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=164&FindType=Y&ReferencePositionType=S&SerialNum=2017321016&ReferencePosition=617re Engman, 395 B.R. 610, 617 (W.D.Mich.2008) (“…’property of the estate’ is limited only to what the debtor himself had owned in that property.”). The property interest of the Debtor that allowed her to revoke or amend the Trust was not absolute; it was contingent upon the Debtor being “living and competent.” The bankruptcy estate inherited that interest subject to the same limitations, and the Trustee cannot now amend the Trust after the Debtor has deceased.

*2 The Trustee has cited several cases in support of the proposition that powers which a debtor can exercise for its own benefit over property may become property of the estate and subject to the control of a bankruptcy trustee. See Askanase, 45 F.3d at 106;Cutter v. Seror ( Inhttp://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=164&FindType=Y&SerialNum=2017665534re Cutter), 398 B.R. 6 (9th Cir. Bankr.App. Panel 2008); West v. Parker (http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=164&FindType=Y&SerialNum=2006723475Inhttp://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=164&FindType=Y&SerialNum=2006723475re Watson), 325 B.R. 380 (Bankr.S.D.Tex.2005); Osherow v. Porras ( Inhttp://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=164&FindType=Y&SerialNum=1998182978re Porras), 224 B.R. 367 (Bankr.W.D.Tex.1998) [D.E. 38 at pp. 2-7]. The Court does not disagree with that proposition.

The issue here, however, is not whether the Debtor’s interest in the Trust became property of the bankruptcy estate-it did. The issue is the extent of that interest. “In interpreting the terms of a trust, ‘resort is had in the first place to the instrument, if any, under which the trust is created. As to any matter expressly covered by the instrument, the provi-sions of the instrument, if unambiguous, determine the terms of the trust.’ ” Askanase, 45 F.3d at 106 (quoting IIA Scott on Trusts § 164.1 at 253 4th ed.1987). The terms of the Trust are clear: the Debtor could revoke or amend the trust so long as she was living and competent. Those preconditions can no longer be satisfied, and it is therefore

ORDERED that the Motion to Strike [D.E. 32] is GRANTED. The Notice [D.E. 29] is STRICKEN.

In re Dumford
Slip Copy, 2009 WL 3861487 (Bkrtcy.S.D.Fla.)

If you have questions regarding your rights as a Debtor, or if you are considering bankruptcy, The White Law Group may be able to help. To speak to a securities attorney, please call our Chicago office at 312-238-9650 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, visit https://whitesecuritieslaw.com.

Tags: , , , Last modified: December 6, 2022