## Facts

- Fred O. Johnson created an inter vivos trust in 1982, naming Farmers & Merchants Bank as trustee and transferring most of his assets to the trust.
- The trust corpus consisted largely of closely held corporate stock, plus real estate and cash; Fred’s wealth exceeded $1 million.
- Under the trust arrangement, Fred retained sweeping lifetime control over trust property, including practical authority to manage, sell, and dispose of assets as though still personally owned.
- Fred exercised that control by selling a corporation held by the trust without the trustee’s consent, indicating the trustee’s role was largely nominal while Fred lived.
- Fred died in 1983; the trust held roughly $1.4 million while the probate estate held substantially less (about $150,000).
- Fred’s will provided Dorothy Marie Johnson (his surviving spouse) limited benefits, including income from a separate trust funded with estate assets and certain specific property.
- Dorothy renounced the will and sued to set aside the 1982 trust as an illusory transfer and a device to defeat her statutory elective share.
- The circuit court granted summary judgment for Dorothy, treating trust assets as part of the property base for calculating her elective share.
- The trustee and principal trust beneficiaries appealed.

## Issues

1. Whether an inter vivos trust should be treated as illusory or effectively testamentary, for elective-share purposes, when the settlor retains extensive control and economic benefit.
2. Whether West Virginia law permits a surviving spouse to reach trust assets where the lifetime transfer operates as a fraud on marital rights.
3. Whether summary judgment is proper when the material facts concerning the settlor’s retained control are not genuinely disputed.

## Decision

- The Supreme Court of Appeals of West Virginia affirmed summary judgment for the surviving spouse.
- The court held that an inter vivos trust may be disregarded as against a surviving spouse when the settlor retains such dominion and benefit that there is no meaningful divestment.
- Because Fred retained complete control and the principal economic shift occurred at death, the trust functioned as a testamentary substitute that could not defeat the elective share.
- The court approved summary judgment because the dispositive facts about retained control were undisputed and the legal consequence followed as a matter of law.

## Legal Principles

- A lifetime trust transfer may be treated as illusory, and ineffective against the surviving spouse’s elective share, when the settlor retains extensive incidents of ownership and economic benefit.
- Courts assess substance over form; retained powers and practical control may render a trust testamentary in effect for purposes of protecting spousal statutory rights.
- Statutory elective-share protections cannot be avoided by arrangements that are inter vivos in form but operate to shift wealth primarily at death while preserving the settlor’s lifetime ownership attributes.
- Summary judgment is appropriate where the trust terms and the settlor’s retained control are established without genuine factual dispute and the application of the elective-share protection is a legal question.

## Conclusion

The court treated the trust as an illusory lifetime transfer because the settlor kept complete lifetime control and benefit, and it required the trust assets to be included when calculating the surviving spouse’s elective share, affirming summary judgment in her favor.


Johnson v. Farmers & Merchants Bank, 379 S.E.2d 752 (W. Va. 1989)