Facts
- Agnes T. Seifert (“Widow”) was married to Harry E. Seifert (“Husband”) for about ten years.
- Husband created a revocable inter vivos trust primarily benefiting his two daughters from a prior marriage and transferred most of his property to it; the trust held about $800,000 at his death.
- The trust provided that, upon Husband’s death, a separate $150,000 subtrust for Widow would be created, giving her a life income interest with limited principal invasion for medical purposes.
- Husband’s will gave Widow a one-half life interest in the marital home (half of which she already owned) and directed the residue to be transferred to the trust.
- Husband retained extensive lifetime control: the trust was fully revocable, and the trustee’s authority over sale and investment was effectively subject to Husband’s written approval (absent proof of incompetence).
- After Husband’s death, Widow timely elected to take her statutory elective share, but the probate estate contained few assets apart from items already described.
- Widow sought a declaration that the trust assets should be counted when valuing her elective share.
Issues
- Whether a decedent’s revocable inter vivos trust may be treated as an illusory transfer and included in the decedent’s estate for purposes of calculating the surviving spouse’s statutory elective share.
- Whether the degree of control retained by the settlor over trust property can prevent the trust from defeating the surviving spouse’s elective-share rights.
Decision
- The Supreme Court of South Carolina reversed the Master-in-Equity.
- The court held the trust was illusory because Husband retained such extensive control that, in substance, he kept the same rights in the property as before the trust’s creation.
- The court ruled the trust assets must be included in the estate for the limited purpose of determining the value of Widow’s elective share.
Legal Principles
- A revocable inter vivos trust may be treated as an illusory transfer against a surviving spouse’s elective-share claim when the settlor retains dominion and control equivalent to ownership.
- Retained powers such as complete revocation and effective control over trustee management (including sales and investments) support a finding that the transfer is not substantive for elective-share purposes.
- The elective-share statute may not be defeated by lifetime arrangements that are nominal in form but leave practical ownership and control with the decedent.
- In valuing an elective share, courts may look to the substance of the transaction and include controlled trust assets to prevent evasion of statutory spousal rights.
Conclusion
Because Husband’s revocable trust left him with ownership-like control and functioned to reduce the Widow’s elective share, the court treated the trust as illusory and required that its assets be included when calculating the Widow’s elective share.