473 P.3d 363 (Idaho 2020)
Roger and Sybil Ferguson created the Ferguson Family Revocable Trust on May 23, 1994, which they amended on October 14, 2011.1 The Original Trust named Roger and Sybil as co-trustees during their joint lifetimes and expressly excluded their son Michael Ferguson as a beneficiary under Article Two of the Amended and Restated Trust Agreement.2 Upon the death of the first grantor the trust would become irrevocable and its assets would be divided among three sub-trusts: the Roger Ferguson Family Trust, the Roger Ferguson Nonexempt Marital Trust, and the Survivor's Trust.3
Roger Ferguson died on April 7, 2012.4 Sybil Ferguson then served as sole trustee of the sub-trusts and, on October 3, 2013, executed her last will and testament in which she exercised a power of appointment to name Michael Ferguson and several grandchildren as beneficiaries of the Survivor's Trust.5 The Survivor's Trust consisted of Sybil's separate property and one-half of the community property from the Original Trust.6 Sybil Ferguson died on May 23, 2015, and her will was admitted to probate in Maricopa County, Arizona on August 31, 2015, where three of her children—Wade Ferguson, Lois C. Ferguson, and J. Xarissa Koenig—were appointed co-personal representatives of her estate.7
After Sybil's death Michael Ferguson requested financial information and records for the Original Trust and all sub-trusts dating back to Roger Ferguson's death in 2012.8 On July 27, 2016, Michael filed a Petition for Accounting and Performance of Trustee Duties, which he amended on March 23, 2017, seeking to review the initial allocations among the sub-trusts to determine whether the Survivor's Trust had received its full share.9 On March 16, 2017, while this matter was pending before the magistrate court, Michael Ferguson submitted a written claim against Sybil Ferguson’s estate.10 The claim asserted that Michael Ferguson was a creditor of her estate because Sybil Ferguson, as trustee of the Survivor’s Trust, breached fiduciary duties owed to him.11 The co-representatives disallowed Michael Ferguson’s claim against the estate, and Michael Ferguson subsequently filed a Petition for Allowance of Claim and for Stay in the probate court.12 The parties subsequently stipulated to a stay of the Arizona probate proceeding pending resolution of this case.13
The Successor Trustees—Wade Ferguson, Lois C. Ferguson, J. Xarissa Koenig, and Steven J. Hart—provided an inventory and interim accounting of the Survivor's Trust after Sybil's death but produced no documents from before May 23, 2015.14 Michael moved for partial summary judgment on the first five affirmative defenses, and the Successor Trustees filed a supplemental affirmative defense and counterclaim asserting that Michael's Arizona petition triggered the Trust Agreement's forfeiture provision.15 The magistrate court denied summary judgment on the forfeiture defense, granted summary judgment on the first five defenses, and denied Michael's motion to compel pre-death records.16 Both parties appealed to the district court, which reversed the magistrate court in part on beneficiary status and applied the forfeiture provision.17 Michael Ferguson timely appealed to the Idaho Supreme Court.18
Whether Sybil Ferguson owed fiduciary duties to Michael Ferguson as a beneficiary of the Survivor's Trust during her lifetime?19
A trustee has a duty to administer the trust diligently and in good faith, in accordance with the terms of the trust and applicable law.20 Even where a trustee maintains discretion to spend the trust’s assets, the trustee is still subject to basic fiduciary duties, including the duty to act reasonably informed with impartiality among beneficiaries and the duty to provide information concerning the trust.21 Idaho trust law recognizes these duties in statute, such as Idaho Code section 15-7-303, and in the common law, including the duty of loyalty.22
Yes. Roger and Sybil Ferguson created the Original Trust in 1994 and amended it in 2011, expressly excluding Michael Ferguson as a beneficiary under Article Two.23 Roger Ferguson died on April 7, 2012, rendering the trust irrevocable and dividing assets among the sub-trusts, after which Sybil Ferguson served as sole trustee of the Survivor's Trust.24 On October 3, 2013, Sybil exercised her power of appointment in her will to name Michael Ferguson a beneficiary of the Survivor's Trust, making him a beneficiary for the eighteen months preceding her death on May 23, 2015.25
The Trust Agreement granted Sybil broad discretion to distribute principal for any purpose, yet the Restatement (Third) of Trusts section 50 establishes that such discretion does not eliminate basic fiduciary duties.26 Idaho Code section 15-7-303 requires trustees to keep beneficiaries reasonably informed and to provide relevant information upon request, while common law imposes the duty of loyalty as set forth in Taylor v. Maile.27 The district court erred when it examined only the Trust Agreement and concluded that Sybil's discretion relieved her of all duties and left Michael without enforceable rights before her death.28
Sybil Ferguson owed fiduciary duties to Michael Ferguson as a beneficiary of the Survivor's Trust during her lifetime.29
Whether Michael Ferguson is entitled under Idaho Code section 15-7-303 to relevant financial records from the Original Trust regarding allocations to the Survivor's Trust?30
Idaho Code section 15-7-303(b) requires a trustee, upon reasonable request, to provide a beneficiary with relevant information about the assets of the trust and the particulars relating to its administration.31 The statute contains no temporal limitation, and the definition of beneficiary under Idaho Code section 15-1-201(3) includes persons with present or future, vested or contingent interests, placing contingent and vested beneficiaries on equal footing for information requests.32
Yes. After Sybil Ferguson's death, Michael Ferguson requested financial records for the Original Trust and sub-trusts dating back to Roger Ferguson's death in 2012 to determine whether the Survivor's Trust received its full share of allocated assets.33 The Successor Trustees produced only post-death Survivor’s Trust records and refused pre-death information.34 Section 5.02 of the Trust Agreement required allocation of the surviving grantor’s property to the Survivor's Trust upon Roger’s death.35 The deceased grantor’s property was allocated to the Marital and Family Trusts.36 Those initial allocations are directly relevant to whether the Survivor's Trust received its proper share.37
Idaho Code section 15-7-303(b) asks only whether the information is relevant to trust assets and administration, without restricting the time period.38 The district court mentioned the statute only once and failed to analyze whether the requested pre-death allocation records satisfied the relevance standard, even after correctly holding that Michael became a beneficiary in October 2013.39
Michael Ferguson is entitled under Idaho Code section 15-7-303 to relevant financial records from the Original Trust regarding allocations to the Survivor's Trust.40
Whether the no-contest provision in the Trust Agreement is enforceable against Michael Ferguson based on his filing of a creditor's claim in Arizona probate court?41
No-contest provisions in trust instruments are enforceable in Idaho unless probable cause existed for instituting the proceedings or enforcement would interfere with the proper administration of the trust.42 Such provisions are construed narrowly and are ordinarily unenforceable to prevent a demand for a trustee’s accounting or to punish efforts to ascertain facts necessary to decide whether to institute proceedings.43
No. Section 20.03 of the Trust Agreement contains a forfeiture provision triggered when a beneficiary files suit on a creditor’s claim in a grantor’s probate estate after rejection by the fiduciary.44 Michael Ferguson’s Arizona petition fell within the literal scope of subsection (c) because it asserted a creditor’s claim against Sybil Ferguson’s estate.45 Nevertheless, the Successor Trustees refused to supply any pre-death allocation records despite Michael’s requests under Idaho Code section 15-7-303(b).46 Michael filed the Arizona petition approximately ten months after his Idaho petition and immediately sought a stay to preserve rights under Arizona’s two-year statute of limitations while awaiting Idaho records.47
Enforcing the forfeiture provision under these circumstances would penalize a beneficiary for seeking information to which he is entitled.48 Such enforcement would interfere with the proper administration of the Survivor's Trust, contrary to Restatement (Third) of Trusts section 96(2).49 The district court therefore erred in applying the provision without first ensuring the Successor Trustees had satisfied their disclosure duties.50
The no-contest provision in the Trust Agreement is not enforceable against Michael Ferguson based on his filing of a creditor's claim in Arizona probate court.51
Whether the district court erred in failing to address the magistrate court's denial of Michael Ferguson's motion to compel discovery?52
The district court did not reach the discovery issue because it enforced the forfeiture provision based on the erroneous premise that Sybil Ferguson owed no fiduciary duties to Michael Ferguson.53
Yes. The magistrate court denied Michael Ferguson’s motion to compel pre-death trust records because it concluded he was not a beneficiary until after Sybil Ferguson’s death and therefore lacked standing.54 The district court reversed the magistrate court’s beneficiary-status ruling but never reached the motion to compel, instead enforcing the forfeiture provision.55 The forfeiture ruling rested on the same erroneous premise that Sybil Ferguson owed Michael no fiduciary duties. Therefore, the district court’s failure to address the discovery issue left unresolved whether the Successor Trustees must produce the allocation records Michael requested.56
Remand is required so the magistrate court can reconsider the motion to compel in light of the correct legal standards governing fiduciary duties and information rights.57
The district court erred in failing to address the magistrate court's denial of Michael Ferguson's motion to compel discovery.58