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In the Matter of the v. Mark E. Dowell

December 13, 2012

IN THE MATTER OF THE MODIFICATION OF THE MARK E. DOWELL IRREVOCABLE TRUST #1, DATED THE 16TH DAY OF MAY, 2000: ELIZABETH L. DOWELL, APPELLANT (RESPONDENT),
v.
MARK E. DOWELL, APPELLEE (PETITIONER).



Appeal from the District Court of Natrona County The Honorable David B. Park, Judge

The opinion of the court was delivered by: Davis, Justice.

Before KITE, C.J., and HILL, VOIGT, BURKE, and DAVIS, JJ.

NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third. Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building, Cheyenne, Wyoming 82002, of any typographical or other formal errors so that correction may be made before final publication in the permanent volume.

[¶1] While he and Appellant Elizabeth (Betsy) Dowell were still married, Appellee Dr. Mark Dowell created an irrevocable life insurance trust (ILIT) naming Ms. Dowell as its primary beneficiary and their two children as contingent beneficiaries. The couple divorced five years later. Six years after the divorce, Dr. Dowell filed a petition to modify the trust, in which he contended that he did not need to obtain Ms. Dowell's consent to modify because she had relinquished her beneficial interest in the property settlement agreement incorporated into their divorce decree. The district court agreed.

[¶2] Ms. Dowell appeals from the district court's order granting summary judgment to Dr. Dowell. We reverse the order granting Dr. Dowell summary judgment with instructions to instead grant Appellant Elizabeth Dowell's motion for summary judgment.

ISSUE

[¶3] Did Ms. Dowell waive her expectancy in an irrevocable life insurance trust by consenting to the terms of a property settlement agreement which was incorporated in the parties' decree of divorce?

FACTS

[¶4] On May 16, 2000, Dr. Dowell created the ILIT, the proper name of which is the Mark E. Dowell Irrevocable Trust #1. He funded the trust with two life insurance policies: one originally named Ms. Dowell the primary beneficiary and their daughter the sole contingent beneficiary; the second named their daughter and son the primary beneficiaries. Approximately eighteen months after the creation of the ILIT, the beneficiary designations in the first policy were changed to make the ILIT's trustee the sole policy beneficiary.

[¶5] Stated very simply, an ILIT is an irrevocable and, without judicial approval, unamendable trust funded by insurance policies. Upon the death of the insured, the ILIT trustee administers the trust for the benefit of the beneficiaries. If all steps are appropriately taken, federal estate taxation may be avoided or minimized. The parties agree that the settlor of an ILIT cannot maintain or exercise any control over the trust, or it can be considered part of his or her estate for tax purposes. The ILIT specifically eliminated any right of control by the settlor in Article II:

This trust and all interests in it are irrevocable, and the Grantor has no power to alter, amend, revoke, or terminate any trust provision or interest.

[¶6] The ILIT designated Ms. Dowell as its primary beneficiary, while the parties' two children were designated as contingent beneficiaries. The trust instrument directed the trustee to hold and administer the trust assets for Ms. Dowell's benefit and to distribute interest income from those assets to her. It also prohibited the distribution of trust income to the two children who were contingent beneficiaries until after Ms. Dowell's death.

[¶7] On the same date the ILIT trust was executed by Dr. Dowell, the parties separately created the Mark E. Dowell Revocable Trust and the Elizabeth L. Dowell Revocable Trust. The corpus of each of those trusts included the respective settlor's sole or shared interests in personal property, brokerage accounts, and real property, as well as equity interests in various business entities.

[ΒΆ8] On October 14, 2005, the District Court for the Eighth Judicial District entered a decree in the Dowells' divorce proceedings. The decree provided that Ms. Dowell retained primary physical custody of their two children, and the court therefore ordered Dr. Dowell to pay child support. The decree also incorporated the Dowells' property settlement agreement. That agreement permitted each party to retain any household items, retirement accounts, or real property owned in whole by their respective revocable trusts. Where one party's revocable trust owned his or her share of a jointly held interest in realty or business securities agreed to be ...


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