Matter of Albert G. Aaron Living Trust

Barbera, C.J. This appeal reaches us from a dispute between Petitioners, certain interested parties and beneficiaries of a trust created by Albert G. Aaron, and Respondents, the Trustees appointed to execute and oversee the trust. One term of the trust agreement provided that a charitable foundation would be created unless Mr. Aaron was survived by his wife, in which case the foundation would not come into existence. Mr. Aaron's first wife predeceased him, but Mr. Aaron remarried. The parties dispute to which wife the provision should apply.

Resolution of that dispute determines whether the charitable foundation survives. I. Facts and Procedural History The Trust During his life, Albert G. Aaron ("Mr. Aaron") transferred most of his assets to a revocable trust, the Albert G. Aaron Living Trust (the "Trust" or, when appropriate, the "Trust Agreement"). He created the Trust on August 27, 2008, restated it in full on August 10, 2009, and amended it eleven times between 2009 and 2013. Mr. Aaron was married to Eileen Aaron ("Eileen") for many years, but they were separated for the last several.

Eileen died on November 1, 2012. On or about November 6, 2012, Mr. Aaron married Myrna Kaplan ("Myrna"), his long-time girlfriend. On January 10, 2013, Mr. Aaron executed the Eleventh Amendment to the Trust. It was the only amendment made after Eileen's death and Mr. Aaron's marriage to Myrna.

At the time of that amendment, Mr. Aaron was battling esophageal cancer. On January 26, 2013, sixteen days after making the Eleventh Amendment, Mr. Aaron died at the age of 85. Myrna survived Mr. Aaron. Mr. Aaron and Eileen had one child together, Jonathan P. Aaron ("Jonathan").

Jonathan is married to Cheryl Aaron ("Cheryl"). Jonathan and Cheryl have two daughters, Theda R. Aaron ("Theda") and Lena S. Aaron ("Lena"). Myrna, Jonathan, Cheryl, Theda, Lena, and Frances A. Rossi ("Frances," Mr. Aaron's long-time assistant) are beneficiaries of the Trust. All beneficiaries, aside from Myrna and several charitable organizations who are not parties to this appeal, are Petitioners here (hereinafter, collectively, the "Beneficiaries").

Upon Mr. Aaron's death, Respondents, Steven G. Albert and Howard E. Goldman, became the Trustees and Trust Advisors of the Trust. The various Articles of the Trust Agreement lay out the terms of the Trust. Article Two, "Family Information," was never amended. It provided the following: I am married to Eileen Aaron.

Any reference in this agreement to "my wife" is a reference to Eileen Aaron. * * * I have also provided for the following individuals in this agreement: Name Relationship Myrna Kaplan Friend[.] Articles Six through Twelve provide for specific distributions of property and create several trusts: the "Marital Deduction Trust," the "Exempt Marital Deduction Trust," the "Non-Exempt Marital Deduction Trust," the "Myrna Kaplan Trust," the "Frances A. Rossi Trust," and the "Grandchildren's Trusts." Article Thirteen of the Trust Agreement, Section 13.01, provides for the creation of a Consolidated Residuary Trust. The Consolidated Residuary Trust was created to hold the residuary of the trust property, so long as either Myrna or Frances was living. The beneficiaries of the Consolidated Residuary Trust are Myrna, Frances, Jonathan, Cheryl, and Jonathan's descendants (Theda and Lena). The Trustees were authorized to make distributions to those beneficiaries and to use it as a source of payment for obligations created under other Articles of the Trust Agreement.

Section 13.02 directed that, on the death of both Myrna and Frances, the Consolidated Residuary Trust be terminated and its assets distributed in accordance with the subsequent sections of Article Thirteen. Once the Consolidated Residuary Trust was terminated, Section 13.03 directed the Trustees to designate 25% of the remaining trust property as the "Foundation Share" and the balance of 75% as the "Family Share." Section 13.04 directed the Trustees to use the Foundation Share to create the Aaron Family Foundation ("Foundation"), a private organization within the meaning of § 509(a) of the Internal Revenue Code and treated as tax-exempt under § 501(c)(3) of that Code. Section 13.04 contained the following contingent clause at issue: If my wife survives me, this distribution shall lapse and the property subject to this distribution shall instead be distributed under the other provisions of this agreement. (Emphasis added).

Consequently, if Mr. Aaron outlived his wife, the Foundation would be created. But if his wife survived him, the distribution to the Foundation would lapse and Mr. Aaron's other beneficiaries-i.e., Jonathan, Cheryl, Theda, and Lena-would receive the remaining 25% of the Consolidated Residuary Trust. The next five pages of Section 13.04 stated the purpose of the Foundation, established an Advisory Committee to control its charitable activities, and detailed specific recurring distributions that the Foundation was to make, among other things. Mr. Aaron amended the Trust Agreement eleven times before his death.

The majority of the changes in the first ten amendments concerned distributions to Myrna and Frances. Those amendments did not reference Section 13.04 and are largely irrelevant to the issue we decide. The Eleventh Amendment, however, made several significant changes to the Trust Agreement. It amended Section 6.01, which addressed the distribution of Mr. Aaron's automobiles, to add that "[t]he Jaguar is conveyed to Myrna Kaplan Aaron, my current wife." It also altered Section 6.04, which concerned the creation of a Marital Deduction Trust.

The Amendment provided that "Section 6.04 originally intended to be relevant for provisions of my past deceased wife, Eileen Aaron, shall now be intended to be for my current wife, Myrna Kaplan Aaron." In addition, the amendment increased from $2 million to $8 million the amount to be allocated to the Marital Deduction Trust and provided that the Marital Deduction Trust should be used first to satisfy all distributions to Myrna. The Eleventh Amendment also "specifically revoke[d] the provisions of the First Amendment which provided that Sections 7.01, 7.02, 7.03, and 7.04 of Article Seven were to be deleted if my spouse survived me" and mandated that "such sections shall apply to Myrna Kaplan Aaron." Mr. Aaron made two other changes in the Eleventh Amendment that are worth noting. Mr. Aaron changed the composition of the Advisory Committee. Originally, the members were to be Jonathan, Myrna, Richard G. Wohltman ("Richard"), and Steven G. Albert.

Paragraph E of the Eleventh Amendment removed Myrna and Richard from the Committee and provided that "[t]he remaining initial members shall select two other members so that there will be four members in total." 1 Mr. Aaron also amended Section 6.06, which concerned his real property interests, to provide in part that "[i]f Myrna Kaplan Aaron should predecease me, this distribution shall lapse[.]" Mr. Aaron referred either to "Myrna Kaplan Aaron" or "Myrna Kaplan" each time she was mentioned in the Eleventh Amendment. The Trust Advisors were authorized under Section 3.10(j) of the Trust Agreement to amend any provision of the agreement to "[c]orrect ambiguities, including scrivener errors, that might otherwise require court construction or reformation[.]" The Trust Advisors were not permitted to "limit or alter the rights of a beneficiary in any trust assets held by the trust before the amendment." The Court Proceedings Shortly after Mr. Aaron's death, Myrna requested certain payments from the Trustees pursuant to the amended Trust Agreement. The Trustees, believing the requested payment amounts to be excessive, filed for a declaratory judgment pursuant to Section 3-408 of the Courts and Judicial Proceedings Article and Maryland Rules 10-101 and 10-501. 2 The parties reached a settlement, memorialized in a Settlement Agreement. The Trustees then filed in the Circuit Court for Baltimore City a "Petition to Approve Settlement and Modify Trust." The Trustees requested the circuit court to assume jurisdiction over the Trust, approve the Settlement Agreement, and approve the Trustees' proposed restatement of the Trust Agreement (the "2016 restatement").

The intent of the proposed restatement was to simplify the original Trust Agreement and eleven amendments into one unified document that incorporated all of the changes. One change the Trustees proposed was to remove the clause in Section 13.04 containing the language "[i]f my wife survives me, this distribution [to the Foundation] shall lapse and the property subject to this distribution shall instead be distributed under the other provisions of this agreement." The Trustees reasoned that, upon Eileen's death in November 2012, the provision became unnecessary. On August 26, 2015, the circuit court issued a Show Cause Order directing the Beneficiaries to show cause why the petition should not be granted. At issue were three contentions raised by the Beneficiaries that are not relevant to this appeal.

Then, on February 4, 2016, the Beneficiaries filed a Supplemental Response disputing the propriety of removing the "if my wife survives me" clause in Section 13.04. The Beneficiaries contended that a bequest providing for the creation of the Foundation had lapsed because, they argued, the term "my wife" referred not to Eileen but rather to Mr. Aaron's second wife, Myrna. After a hearing, the Honorable Althea M. Handy, ruling from the bench, granted the relief requested by the Trustees and approved the 2016 restatement. The court, reasoning that "once Ms. Eileen Aaron passed away[,] ... that was the critical date," agreed with the Trustees that the reference to "my wife" in Section 13.04 of the Trust Agreement did not transfer automatically from Mr. Aaron's first wife, Eileen, to his second wife, Myrna.

The Beneficiaries noted an appeal. The sole issue before the Court of Special Appeals, as it is here, was whether the circuit court had erred in approving the 2016 restatement and declaring, in particular, that the words "my wife" in Section 13.04 of the Trust Agreement refer to Eileen, not Myrna. The Court of Special Appeals affirmed the judgment of the circuit court. In a soundly reasoned, unreported opinion, the Honorable James R. Eyler, writing for the panel, held that the words "my wife" referred to Eileen; therefore, the distribution to the Foundation did not lapse.

In the Matter of the Albert G. Aaron Living Trust , No. 253, slip op. at 4 (Md. Ct. Spec. App. Apr. 14, 2017). We agree with the panel's reasoning and affirm the holding of the Court of Special Appeals. Additional facts will be supplied as necessary in the sections below.

II

Standard of Review "It is axiomatic that the intention of the settlor governs the interpretation of a trust agreement." Brent v. State of Md. Cent. Collection Unit , 311 Md. 626 , 631, 537 A.2d 227 (1988). The interpretation of a trust, like a will, is a legal determination, and we review de novo the lower court's decision. Vito v. Grueff , 453 Md. 88 , 106, 160 A.3d 592 (2017) ; Pfeufer v. Cyphers , 397 Md. 643 , 648, 919 A.2d 641 (2007).

Therefore, we determine whether the circuit court was "legally correct." Schisler v. State , 394 Md. 519 , 535, 907 A.2d 175 (2006) ; Nesbit v. Gov't Emps. Ins. Co. , 382 Md. 65 , 72, 854 A.2d 879 (2004). 3 III. Discussion A. The Parties' Contentions Neither party in this case advocates for a rule of law regarding trust construction that has not already been articulated by this Court.

Rather, the Beneficiaries and the Trustees agree that the intent of the settlor controls the disposition of a trust. They disagree, however, as to what Mr. Aaron's intent was. In particular, the parties interpret differently the effects of Mr. Aaron's amendments to the Trust as they pertain to the meaning of "my wife" in Section 13.04. The thrust of the Beneficiaries' argument is that Mr. Aaron's clear intent "was to assure that his direct decedents [ sic ] had sufficient funds for their future." They argue that if Mr. Aaron's "wife" (whomever she may be, past or current) died before Mr. Aaron, she would not require any distributions from the corpus of the Trust.

Thus, absent those distributions to the wife, the Trust would contain sufficient assets for both Mr. Aaron's descendants and the Foundation, so the Foundation could validly be created. The Beneficiaries further maintain that if Mr. Aaron's wife survived him, he intended to provide funds for her to live comfortably for the rest of her life. The Beneficiaries reason that with a living wife receiving regular distributions, less funds would be available for Mr. Aaron's descendants. Therefore, as the Beneficiaries see it, because significant amounts of money-money that would have otherwise been used to create and sustain the Foundation-were now going to his surviving wife, in keeping with Mr. Aaron's intent, the Foundation would not be created, thereby preserving adequate funding for his descendants.

Mr. Aaron's wife, Myrna, survived him. Therefore, according to the Beneficiaries, the distribution to the Foundation should lapse and available funds should be used to provide support to Myrna and, eventually, Mr. Aaron's descendants. In support of their argument, the Beneficiaries offer a lengthy recitation of secondary material and case law, some from other jurisdictions, purporting to synthesize the majority view of trust construction. Essentially, the Beneficiaries set forth the following general tenets to support their interpretation of Mr. Aaron's intent.

First, relying on two American Law Reports annotations and Lavender v. Rosenheim , 110 Md. 150 , 72 A. 669 (1909), the Beneficiaries assert that a trust or will referring to a spouse is ordinarily presumed to mean the spouse at the time the instrument was executed, but courts must take into account all provisions of the instrument and the surrounding circumstances to determine a settlor's intent. The Beneficiaries read Mr. Aaron's references to Myrna in the Eleventh Amendment as indications that, at the time the Amendment was executed, he knew that his wife was Myrna, and that those references are enough to overcome the presumption extant at the time the Trust was originally executed. Second, the Beneficiaries posit that a former spouse is distinguishable from a surviving spouse. They cite Wright v. State , 198 Md. 163 , 171, 81 A.2d 602 (1951), for the proposition that a marriage presumptively lasts until it is terminated by death, annulment, or divorce.

They also cite In re Atwood's Trust , 262 Minn. 193 , 114 N.W.2d 284 (1962), a Minnesota Supreme Court case in which the court stated that "[a] divorced husband or wife is a former spouse and cannot be a surviving spouse." Id. at 288 . Though not explicitly stated, the Beneficiaries apparently wish to convey that because Eileen died and Mr. Aaron remarried, her marriage to Mr. Aaron was terminated, and, thus, she could not properly be referred to as his wife. Third, the Beneficiaries submit that all language in a trust instrument must be given effect, including modifications or amendments; and, when a conflict exists between two provisions, they should be reconciled to give meaning to every part of each. If that is not possible, the provision adopted later in time that expresses the testator's or settlor's intent should control.

The Beneficiaries cite cases from various of our sister states that, according to the Beneficiaries, establish that courts "have given effect to modifications of trusts that changed the identities of beneficiaries or parties." Fourth, citing the Restatement (Third) of Property , the Beneficiaries claim that a settlor's specific intent and general dispositive plan to provide for a surviving spouse and family members should be preferred over a contingent charitable beneficiary. The Beneficiaries argue that Mr. Aaron's "general or overall dispositive scheme" was to provide for his family members if Myrna survived him, and that such a construction comports with the preference of the Restatement to "favor[ ] family members over non-family members." Restatement (Third) of Property , § 11.3(c)(3). Fifth and finally, the Beneficiaries recite the proposition that trusts that are indefinite as to beneficiaries should be declared void and ask us to declare the Trust invalid in part. Pointing to the terms of the trust instrument and the subsequent amendments thereto, the Beneficiaries insist that Mr. Aaron's overarching intent was to provide for his surviving spouse and family members.

Otherwise, Mr. Aaron would not have structured the Trust such that the distribution to the Foundation would lapse if both his spouse and family members were still alive. As applied to the facts of this case, the Beneficiaries argue, the principles summarized above establish that construing the term "wife" as referring to Myrna is the only construction that comports with Mr. Aaron's intent. The Beneficiaries offer Mr. Aaron's repeated references to Myrna in the Eleventh Amendment as evidence that he intended to provide for her-his wife- and his descendants; if Myrna was still living at the time of his death, adequate funds might not be available for his descendants. The Beneficiaries further argue that the record contains no evidence that Mr. Aaron was facing imminent death.

They therefore challenge as unsupported by the record the Trustees' inference of his intent from the "virtual certainty" that he would die before Myrna. Finally, the Beneficiaries contend that this Court should "opt for the construction of the phrase that accords with the Settlor's general or overall dispositive scheme and/or the one that favors family members over non-family members." If those arguments fail, the Beneficiaries would have us hold that the Trust is invalid in part for indefiniteness as to a beneficiary or beneficiaries. The Trustees counter that the Court of Special Appeals correctly focused on Mr. Aaron's expressed intent-the definition of "my wife" contained in Article Two, which Mr. Aaron never amended-rather than, as the Trustees characterize it, the intent that the Beneficiaries merely infer from the structure of the Trust. The plain language of the Trust Agreement, the Trustees insist, controls the disposition of this case.

The Trustees also point to the Eleventh Amendment, in which Mr. Aaron referred to Myrna by name on several occasions. When he did use the word "wife," he never did so without specifying Eileen or Myrna. Such a distinction is evidence that when Mr. Aaron wanted to refer to Myrna, he did so specifically and with qualification. Because he never altered the term "my wife" in Section 13.04, the definition in Article Two continues to apply.

The Trustees note as well that, in the Eleventh Amendment, Mr. Aaron changed the makeup of the Advisory Committee. The Trustees contend that this change, coupled with the "virtual certainty" that Myrna would survive him, would make no sense if Mr. Aaron did not intend for the Foundation to exist. And, according to the Trustees, Mr. Aaron took care to emphasize the importance of his charitable objectives through the Trust Agreement. As characterized by the Trustees, the Beneficiaries' entire argument is that under the common law, a testator's spouse is presumed to be the spouse at the time of execution, but a party can rebut that presumption by presenting evidence of a contrary intent.

And because the Beneficiaries have presented no evidence of such an intent, offering speculation at best, the Trustees assert that a holding in their favor is required. B. Analysis As did the Court of Special Appeals, we begin by reciting the well-settled rules governing the construction of a trust. The process of construing a trust instrument follows the same rules as construing a will. Vito , 453 Md. at 106 , 160 A.3d 592 ; Bogert et al., The Law of Trusts and Trustees , ch. 11, § 182 (3d rev. ed. 2017) ; see also Restatement (Third) of Trusts § 4 cmt. d (Am.

Law. Inst. 2003). Accordingly, the "paramount concern of the court" in interpreting a trust, as with interpreting a will, "is to ascertain and effectuate the [settlor's] expressed intent." Pfeufer v. Cyphers , 397 Md. 643 , 649, 919 A.2d 641 (2007) (quoting Emmert v. Hearn , 309 Md. 19 , 23, 522 A.2d 377 (1987) ). "This expressed intention must be gathered from the language of the entire [trust], particularly from the clause in dispute, read in the light of the surrounding circumstances" at the time the trust was created.

Leroy v. Kirk , 262 Md. 276 , 280, 277 A.2d 611 (1971). Ordinarily, a settlor's intent is discerned from within the four corners of the trust agreement, and language is given its plain and ordinary meaning. Emmert , 309 Md. at 23 , 522 A.2d 377 . Where possible, and in accord with the objects and purposes of the trust, all of the language in a trust agreement should be given effect.

First Nat'l Bank of Md. v. Dep't of Health & Mental Hygiene , 284 Md. 720 , 728-29, 399 A.2d 891 (1979) (citing Vickery v. Md. Tr. Co. , 188 Md. 178 , 188, 52 A.2d 100 (1947) ); McCrory Stores Corp. v. Bennett , 159 Md. 568 , 573, 152 A. 258 (1930). We agree with the Trustees that the phrase "my wife" in Section 13.04 refers to Eileen