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Part II: Five by Five Clause

To continue our previous blog on the Estate of Cairns, Grant served as sole trustee of the Trust until 2005, after which, the court appointed Glenn Cook to serve as co-trustee. Each year that Grant served as trustee, court-approved annual accounting reports were filed specifying the trust principal amounts he received through the exercise of his five-or-five election.

In October 2008, Grant made a written request for a principal distribution equal to 5% of the fair market value of the trust estate as of December 31, 2007. Based on appraisals, the fair market value of the property as of the 2007 year-end was $14,591,173.57. Grant requested that the distribution take the form of a conveyance to him of "an undivided (5.325 percent) fractional interest in real property commonly known as 3683 Silverado Trail, St. Helena. The principal distribution pertains to the calendar year 2007. The trustees filed a petition on November 21, 2008 for construction of trust and for instructions to distribute 5% of principal assets to beneficiary. Kenneth objected to the petition stating that Grant waived his right to receive a payment for the year 2007 since he failed to make the request in the same year. Kenneth further asserted that Margaret's will required the exercise to withdraw principal as well as the payment to be made in the same calendar year.

The trial court determined that Grant's 2008 election for the year 2007 was valid since the Trust's five-or-five provision allows a beneficiary the right to an annual principal of $5,000 or 5% of the fair market value of the Trust assets based on the value "as of December 31 of the preceding year." The court granted the trustees authorization to make a distribution to Grant in the form of "money or its equivalent, in-kind distributions of undivided interests in principal assets other than money or its equivalent, or a combination of both. Kenneth appealed.

Tune in for more on this topic on subsequent blog.

*This blog entry was not written by an Attorney and should not be construed as professional legal advice.

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