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HomeMy WebLinkAbout12-27-12 r•.3 Cl> ::i7 f'ql r°1 rn n c:> m C -D Zf- Johnson, Duffie, Stewart & Weidner, P.C. ~n By: Jerry R. Duffle CJ Y'f Attorney I.D. No. 9601 301 Market Streeti P. O. Box 109 (JI Lemoyne, Pennsylvania 17043-0109 (717) 761-4540 jrd@jdsw.com Attorneys for Petitioners IN RE: TRUST A ESTABLISHED PURSUANT ) COURT OF COMMON PLEAS TO THE ESTATE PLAN AGREEMENT ) CUMBERLAND COUNTY, PENNSYLVANIA OF TRUST OF MAX C. HEMPT ) MARTHA D. HEMPT, Beneficiary, and ) GERALD L. HEMPT, Beneficiary and as ) ORPHAN'S COURT DIVISION Trustee of the Trust A established pursuant ) to the Estate Plan Agreement of Trust of ) '1 Max C. Hempt, dated January 29, 1987 ) NO. 2012 - Petitioners, ) PETITION AND NOW, Petitioners, MARTHA D. HEMPT and GERALD L. HEMPT, through their respective attorneys, RICHARD W. STEVENSON, McNEES, WALLACE & NURICK LLC (for Petitioner Martha D. Hempt) and IVO V. OTTO, III, MARTSON DEARDORFF WILLIAMS OTTO GILROY & FALLER (for Petitioner Gerald V, Hempt), and JERRY R. DUFFIE, JOHNSON, DUFFIE, STEWART & WEIDNER, P.C. (for Petitioner Gerald L. Hempt) and represent as follows: 1. This Petition requests an Order, pursuant to Section 7740.1 and Section 7740.7 and Section 7740.2, Probate, Estate and Fiduciaries Code, 20 Pa. C.S.A. CH 77 7701 et seq. ("PEF Code") (a) severing Trust A ("Trust A") established pursuant to the Estate Plan Agreement of Trust, dated January 29, 1987 (the "Max C. Hempt Trust"), into two (2) separate trusts ("Trust A-I" and "Trust A-II," respectively); (b) approving the funding of Trust A-I and Trust A-II in the manner herein requested; (c) approving the renunciation by Martha D. Hempt (surviving spouse of Max C. Hempt and the sole income and current principal beneficiary of Trust A) of her lifetime interest in Trust A-II; and (d) directing the acceleration of the remainder interest in Trust A-II, with the result that (i) Trust A-II shall be terminated and (ii) the assets of Trust A-II shall be distributed to the sole remainder beneficiary of Trust A, Gerald L. Hempt. This Petition also requests an Order under Section 7704.2, PEF Code, modifying Trust A-I in a manner to conform tax apportionment upon Mrs. Hempt's death to take into account the termination of Trust A-II during Martha D. Hempt's lifetime. Jurisdiction 2. This Court has subject matter jurisdiction pursuant to Section 7712(a) and (b), PEF Code. 3. The situs of the Trust A is in Cumberland County, Pennsylvania. Venue 4. Venue for this action is in the Court of Common Pleas, Orphans' Court Division, Cumberland County, Pennsylvania, pursuant to Section 7714(a), PEF Code, because the situs of the trust is Cumberland County. Interested Persons 5. The persons interested in the proceeding and their respective interests in the Trust A are as follows: A. Martha D. Hempt (sometimes referred to herein as Mrs. Hempt), who resides in Lower Allen Township, Cumberland County, Pennsylvania, is the current sole income and current permissible principal beneficiary of the Trust A. B. Gerald L. Hempt, who is a son of Max C. Hempt and Martha D. Hempt and who resides in Fairview Township, York County, Pennsylvania, is a presumptive remainder beneficiary under the Trust A and is the Trustee of Trust A. Gerald L. Hempt has three (3) children, of which two (2) are minors and all three (3) are males. C. Marian H. Semoff, who is a daughter of Max C. Hempt and Martha D. Hempt and resides in Lower Allen Township, Cumberland County, Pennsylvania, is a presumptive remainder beneficiary under Trust A. Marian H. Semoff has no children. D. Martha A. Bair, who is a daughter of Max C. Hempt and Martha D. Hempt, who resides in Perrysburg, Wood County, Ohio, is a presumptive remainder beneficiary under Trust A. Martha A. Bair has two (2) adult children and three (3) minor grandchildren. E. Max J. Hempt, a grandchild of Max C. Hempt and Martha D. Hempt, whose father, George F. Hempt, is deceased, and resides in Monroe Township, Cumberland County, 2 Pennsylvania, is a presumptive remainder beneficiary under Trust A. Max J. Hempt has two (2) children, of which two (2) are minors, one of which is a male. F. Christine H. Murphy, who is a grandchild of Max C. Hempt and Martha D. Hempt and whose father, George F. Hempt is deceased, resides in Silver Spring Township, Cumberland County, Pennsylvania, is a presumptive remainder beneficiary under the Trust A. Christine H. Murphy has no children. G. Gregory F. Hempt, the adult son of Gerald L. Hempt, resides in Fairview Township, York, County, Pennsylvania, is a contingent beneficiary under Trust A. H. Eric W. Bair, an adult son of Martha D. Bair, and resides Loveland, Hamilton County, Ohio, is a presumptive remainder beneficiary under Trust A. I. Allison A. Bair, an adult daughter of Martha D. Bair, and resides in Columbus, Franklin County, Ohio, and is a presumptive remainder beneficiary under Trust A. 6. Of the interested parties referred to above (Martha D. Hempt, Gerald L. Hempt, Marian H. Semoff, Martha A. Bair, Max J. Hempt and Christine H. Murphy) Martha D. Hempt is the only beneficiary eligible to receive distributions during her lifetime. The beneficiaries identified in Paragraph 5 B through I are the persons who would receive Trust A if it terminated right now (i.e., if Martha D. Hempt died now). If any would predecease Martha D. Hempt, his or her share would pass to his or her issue per stirpes. 7. Martha D. Hempt, the sole current beneficiary, is one of the Petitioners herein seeking relief and all of the other beneficiaries, who would inherit currently if Martha D. Hempt were to die today have either joined in this Petition or consented to the entry of the Order requested by the Petitioners, as evidenced by Acceptances of Service and Consent to Relief Requested filed with this Petition as Exhibit A - I. General Allegations 8. Max C. Hempt ("Mr. Hempt") established the Max C. Hempt Trust (Estate Plan Agreement of Trust) on January 29, 1987, with his sons, Gerald L. Hempt and George F. Hempt, as Co-Trustees. A copy of the Estate Plan Agreement of Trust Agreement is attached hereto as Exhibit J. 9. Mr. Hempt died on June 8, 1999 survived by his spouse Martha D. Hempt ("Mrs. Hempt") and his children George F. Hempt, Gerald F. Hempt, Marian H. Semoff and Martha D. Bair. 10. The Trust A was established in accordance with the terms of Section 3(a) and Section 4, Max C. Hempt Trust, upon Mr. Hempt's death. 3 11. Upon Mr. Hempt's death, Gerald L. Hempt and George F. Hempt became Co-Trustees of Trust A. George F. Hempt died on March 13, 2009 and as provided in the Max C. Hempt Trust, Gerald L. Hempt is the sole serving Trustee of Trust A. 12. Section 4(a), Max C. Hempt Trust, requires that Mrs. Hempt receive all of the net trust income from the Trust A at least quarterly. 13. Section 4(b), Max C. Hempt Trust, provides that the Trustee of Trust A shall pay to or for the benefit of Mrs. Hempt principal for her support, maintenance and health care or necessary to permit her to maintain a standard of living approximately equal to that maintained during Max C. Hempt's lifetime, taking into account other sources available to her. 14. Section 4(c), Max C. Hempt Trust, provides that upon Mrs. Hempt's death, and after payment of death taxes attributable to Trust A, the remaining principal of the Trust A will be added to Trust B. Trust B also terminates at Mrs. Hempt's death and provides that: A. Any shares of stock of Hempt Bros. Inc., (or another corporation not relevant in this current action) or successor corporation thereto, or any assets reasonably traceable thereto ("Hempt Bros. Shares") shall be distributed outright to Mr. Hempt's sons George F. Hempt and Gerald L. Hempt. If either of Mr. Hempt's sons is not then living, what would have been that son's share is distributed to the deceased son's male issue, per stripes, who are then living, or if none, to Mr. Hempt's other surviving son or his male issue. Mr. Hempt's son George F. Hempt is deceased, and was survived by a son, Max J. Hempt. If Mrs. Hempt died right now (i.e., Trust A and Trust B terminated), the Hempt Bros. Shares held in Trust A would be distributed outright equally to Mr. Hempt's surviving son, Gerald L. Hempt and to Max J. Hempt, Mr. Hempt's grandson by his deceased son, George F. Hempt. Each of Gerald F. Hempt and Max J. Hempt have male issue. B. The balance of Trust A and Trust B will be distributed, in equal shares, per stirpes to Mr. Hempt's issue, subject to being held in trust for any issue under 30 years of age. If Mrs. Hempt died today, the balance of Trust A would be distributed in equal shares to (i) Gerald L. Hempt, (ii) Marian H. Semoff (iii) Martha D. Bair, and (iv) Max J. Hempt and Christine H. Murphy (Mr. Hempt's grandchildren by his deceased son George F. Hempt) would divide an equal share between themselves. C. Under Section 12 (page 19), Max C. Hempt Trust, all death taxes, to include those attributable to Trust A assets, including any Hempt Bros. Shares, are paid proportionately by those receive property, including any male descendants who receive Hempt Bros. Shares. 4 15. The disposition of the Hempt Bros. Shares (to include sale proceeds thereof) solely involves Max J. Hempt and Gerald L. Hempt or their male issue, both of whom have consented hereto. 16. Section 10, Max C. Hempt Trust, contains a so-called "spendthrift provision." 17. A "QTIP" election was made in Mr. Hempt's estate to defer Federal estate tax on the Trust A assets until the termination of Mrs. Hempt's beneficial interest (i.e., upon her death). 18. Although the QTIP election contemplates payment of an estate tax upon Mrs. Hempt's death, she can lawfully make a deemed transfer of the assets of Trust A for transfer tax purpose by renouncing her interest in part of Trust A, and thereby use a portion of her gift tax exemption to pass a portion of Trust A free of gift and estate tax to the remainder beneficiaries provided however, only if the gift occurs in calendar year 2012. Mrs. Hempt understands that her renunciation will result in her making a gift, however she is not waiving her right of recovery (under Section 2207A(b) of the Internal Revenue Code) of any gift tax paid. Such action may reasonably be expected to reduce the overall Federal transfer taxes for the family. 19. Mrs. Hempt would like to accelerate the distribution of the one half of the Hempt Bros. Shares that will pass to her (and Mr. Hempt's) son Gerald L. Hempt so that Gerald L. Hempt will receive the shares this year. This planning is favorable because it will enable Mrs. Hempt to use some of her gift tax exemption to shelter the gift, and that exemption may otherwise be lost (expire) at the end of this year. Mrs. Hempt would be agreeable to accelerating the distribution of the other one-half of the Hempt Bros. Shares that will pass to her and Mr. Hempt's grandson, Max J. Hempt, so that he would receive those shares this year as well, but for Max J. Hempt's own reasons he has indicated his preference is to not receive those shares until Mrs. Hempt's death. 20. Based on the value of the Trust A's assets excluding the Hempt Bros. Shares, plus Mrs. Hempt's own property, she believes that she has access to more funds than she will ever need. In fact, because Hempt Bros. Inc. generally does not pay any dividend, renouncing her interest in the Hempt Bros. Shares allocable to Gerald L. Hempt likely will have no impact on Mrs. Hempt's cash flow. Accordingly, Mrs. Hempt has concluded that she would like to renounce of her interest in the Hempt Bros. Shares held in the Trust A that are allocable to Gerald L. Hempt, while retaining an interest in the balance the Trust A. 21. Mrs. Hempt's proposed renunciation will not constitute a qualified disclaimer under Internal Revenue Code Section 2518 or a disclaimer under Pennsylvania law (i.e., the renunciation will result in a taxable gift by Mrs. Hempt). However, Mrs. Hempt's proposed renunciation is to be contingent on an Order of the Court granting the relief requested in this Petition and do so on or before the end of 2012. 22. To avoid adverse tax consequences, it is essential that Trust A first be divided into two (2) separate trusts, one trust (Trust A-II) in which Mrs. Hempt would hold the lifetime interest as now, but Gerald L. Hempt and his issue will be the only remainder interest holders and the only 5 asset received will be 1,751.5 Hempt Bros. Shares in which Mrs. Hempt renounces all of her beneficial interest. The second trust (Trust A-I) that would hold the rest of the existing assets in Trust A to include the remaining 1,751.5 Hempt Bros. Shares and would have the terms and beneficiaries as exist today. Mrs. Hempt would not renounce any of her interest in Trust A-I. The spendthrift clause of Trust A (Section 10) does not preclude the termination of Trust A - II because a material purpose of Trust A is being realized by distributing the specified Shares of Hempt Bros. Shares (i.e. 50% of those held in Trust A) to Gerald L. Hempt which is in accordance with Section 5(e)(i) of Trust A (except it is to occur earlier rather than at Mrs. Hempt's death due to about to change tax law) and is caused by her action, i.e. renunciation. Finally, Mrs. Hempt agrees that assets to include her interest in new Trust A-1, are sufficient to maintain her life style. 23. Accordingly, Petitioners are requesting this Court to sever Trust A into two (2) Trusts, Trust A-I and Trust A-I1. The Trustee will allocate one-half of the Hempt Bros. Shares to Trust A-11 and the balance of the Trust A assets to Trust A-1. 24. Section 7740.7(b) PEF Code, gives the Court the authority to divide any trust into two (2) separate trusts and fund them as indicated in Paragraph 22 above. 25. The Trustee shall treat Trust A-1 and Trust A-I1 as separate trusts for all purposes from the date on which the severance is effective. The effective date of both Trust A-I and Trust A-11 would be the date this Court enters an Order approving the severance and Mrs. Hempt's renunciation, but not later than December 31, 2012. 26. The Petitioners also request this Court to direct that Mrs. Hempt's renunciation of her interest under Trust A-11 causes the acceleration of the remainder interest in favor of the remainder beneficiary, Gerald L. Hempt. Although Petitioners' counsel were unable to locate any specific Pennsylvania statute or case law on point, the common law appears to provide that upon the early termination of a term interest (such as Mrs. Hempt's life interest) the remainder interest in the trust should accelerates the trust instrument clearly reflects a contrary intent. See, e.g., Weinstein v. Mackey 408 So.2d 849 (3rd Florida DCA 1982), a copy is attached hereto as Exhibit K (contains discussion of common law and relevant sections of the Restatement of Property.) Other aspects of Pennsylvania law, including the disclaimer statute, indicate that the acceleration of the remainder interest upon an early termination of a term interest occurs. 27. An acceleration of the remainder interest in Trust A-II in favor of the remainder beneficiary Gerald L. Hempt (sole beneficiary of Trust A-II), under the common law of the Pennsylvania, terminates Trust A-11. 28. Section 7740.1(b) (if all beneficiaries of Trust A consent) or 7740.1(d) (if some but not all beneficiaries of Trust A consent) of Section 7740.2, PEF Code, provides the Court with the authority to modify and/or terminate a trust. 6 Count I (Severance of Trust A) 29. Petitioners believe the severance of the Trust A into Trust A-I and Trust A-1I as hereinabove described is an integral and interdependent part of an estate planning technique that may result in a substantial reduction in future Federal transfer tax, and can only inure to the benefit of the family of Mr. and Mrs. Hempt. WHEREFORE, the Petitioners respectfully request that the Court grant the following relief: A. An Order directing that the Trust A be severed into two (2) separate trusts, namely Trust A-1 and Trust A-11, and providing Trust A-I1, upon termination, shall be distributed to Gerald L. Hempt. Notwithstanding the foregoing, new Trust A-I may, after the severance, be referred to as Trust A, and shall use the tax identification number currently used by Trust A. B. Such other relief as the Court deems just and proper. Count II (Funding of Separate Trusts) 30. Petitioners believe that it is in the best interests of the beneficiaries to fund Trust A-I1 with one-half of the Hempt Bros. Shares and the balance of the Trust A assets shall be funded into Trust A-1. 31. Section 7740.7(b), PEF Code, gives the Court the authority to approve a trust division "upon such terms and conditions as the court shall direct." WHEREFORE, the Petitioners respectfully request that the Court grant the following relief: A. An Order approving the funding of Trust A-II with one half of the Hempt Bros. Shares with the balance of the Trust A assets (to include the remaining one-half of the Hempt Bros. Shares) to remain in Trust A-I. B. Such other relief as the Court deems just and proper. 7 Count III (Approval of Renunciation of Beneficial Interest in Trust A-II) 32. Mrs. Hempt desires to renounce her interest in Trust A-11 because of the valuable estate planning benefits available under Federal transfer tax laws. These benefits include: A. The use of some of her gift tax exemption. This is favorable because, absent further Congressional and Presidential action, this gift tax exemption may be eliminated in 2013, and absent the renunciation and the relief requested in this Petition, the Hempt family may incur substantially more estate tax in the future. Even if the current estate and gift tax laws are extended, some future estate tax savings likely will be achieved by the renunciation and the relief requested in this Petition. B. The renunciation and the relief requested in this Petition may reduce the amount of state inheritance taxes upon Mrs. Hempt's death, and thereby save the family additional taxes in the future. C. The renunciation and the relief requested in this Petition will allow an acceleration of the benefit of some of the Trust A-II for Mr. and Mrs. Hempt's son, Gerald L. Hempt and enable him to also undertake tax planning in 2012 as well. 33. This type of gift planning-the division of a QTIP marital trust into two (2) separate trusts, followed by a renunciation by the spouse in one of those trusts with the acceleration of the remainder interest has been blessed by the Internal Revenue Service in private letter rulings. 34. Furthermore, Mrs. Hempt has access to other substantial sources of support that are more than adequate to meet her needs, including the assets of Trust A-I. WHEREFORE, the Petitioners respectfully request that the Court grant the following relief: A. An Order approving Mrs. Hempt's renunciation of her beneficial interest in Trust A-II. B. Such other relief as the Court deems just and proper. Count IV (Termination of Trust A-II; Direction on Taxes) 35. After Mrs. Hempt's renunciation of her entire interest in Trust A-II, she will have no further interest in Trust A-Il. 36. Petitioners' counsel are not aware of a specific Pennsylvania statute or court decision specifically addressing what should happen to a trust if a lifetime beneficiary's interest terminate 8 earlier (i.e., before her death). However, there is guidance in the law indicating that, unless the trust instrument expresses a contrary intent, upon the early termination of a life beneficiary's interest the remainder beneficiary's interest accelerates to possession. The authorities for this view include: A. The common law has been interpreted as requiring this result. See, e.g., Weinstein v. Mackey. (Exhibit K). B. A renunciation like the one here is similar to a statutory disclaimer, except that Mrs. Hempt has previously accepted her interest. Under Pennsylvania's disclaimer statute, if Mrs. Hempt had signed a renunciation upon Mr. Hempt's death and prior to accepting any benefit from the trust, then her renunciation would have been a disclaimer under Section 6201, PEF Code, and the Hempt Bros. Shares at issue would have been distributed outright to Gerald L. Hempt. It is reasonable therefore to conclude that, simply because Mrs. Hempt is giving up her beneficial interest in some of the Hempt Bros. Shares at a later date, the same acceleration of the remainder interest should apply. 37. Since terms of the Trust A reveal that Mr. Hempt intended the Trust A to be a benefit for Mrs. Hempt, rather than merely serving as a means for postponing the distribution of corpus to his children and their families-and the Hempt Bros. Shares to his sons or their male issue, per stirpes, it is logical to believe that, after Mrs. Hempt's renunciation, Mr. Hempt would have had no reason to want any subsequent delay in the distribution of the Hempt Bros. Shares to Gerald L. Hempt. Stated another way, if Mrs. Hempt died now, Trust A would be paid outright to the remainder beneficiaries, and Gerald L. Hempt would receive one-half of the Hempt Bros. Shares outright. There is no reason to believe that if Mrs. Hempt renounces her interest in Trust A-II that Mr. Hempt would not have intended for that trust to terminate upon the renunciation and be distributed to Gerald L. Hempt. 38. This Court possesses the authority to terminate Trust A-II under Section 7740.2, PEF Code, which provides that a court may modify and/or terminate a trust in the event of circumstances that were not anticipated by the settlor, and to do so in a manner that shall approximate Mr. Hempt's probable intent. Petitioners believe Mr. Hempt did not anticipate that there would be particularly beneficial estate tax laws that may expire or that Mrs. Hempt would have such assets that she would have no possible need to benefit from the Hempt Bros. Shares at issue here, and that, Mr. Hempt would be in favor of the Court terminating Trust A-11 in the manner proposed in this Petition. The Court also possesses the authority under Section 7740.1(d) with the consent by some beneficiaries and the Court concludes that (1) if all had consented, the trust could have been modified or terminated under the section and (2) the interests of a beneficiary who does not consent will be adequately protected. As stated in Paragraph 22 above, upon termination of Trust A-Il, certain (i.e. 50%) of the Hempt Bros. Shares pass in conformity with Section 10 of Trust A, with the only difference being timing. If all beneficiaries consent that Section 7740.1(b) applies and is satisfied because there is no material purpose for Trust A-II to continue. 9 39. Petitioners alert the Court to the existence of a spendthrift clause contained in Section 10, Max C. Hempt Trust, which may be read as applying to Mrs. Hempt's beneficial interest in Trust A. Petitioners believe that the Court should enter the relief requested in this Petition, namely approval of Mrs. Hempt's renunciation and termination of Trust A-Il, notwithstanding the existence of a spendthrift clause because Section 7740.2, PEF Code, does not require the court to consider the existence of a spendthrift clause in deciding whether to modify or terminate a trust under that section. The Petitioners believe that a termination of the trust (and approval of Mrs. Hempt's renunciation) under Section 7740.2, PEF Code is warranted and further is warranted under Section 7740.1(b) if all beneficiaries consent or if not all, then under Section 7740.1(d) or Section 7740.2 for the reason set forth in Paragraph 22 above. 40. As set forth above, in Section 12, Max C. Hempt Trust, provides that upon Mrs. Hempt's death, the recipients of the Hempt Bros. Shares, and all of the other assets of the Trust A, shall bear their proportionate share of any transfer taxes generated by the assets they receive. The early termination of Trust A-II in 2012 will use a portion of Mrs. Hempt's unified gift/estate tax exemption in favor of Gerald L. Hempt. Therefore, Petitioners request that the Court's Order terminating Trust A-II also direct that, upon Mrs. Hempt's death, Gerald L. Hempt or his estate shall pay his proportionate share of the Federal transfer taxes payable at Mrs. Hempt's death on Trust A-I and, (ii) if Mrs. Hempt dies within one year of her gift, pay any Pennsylvania inheritances taxes that are payable under the Trust with respect to her deemed gift to Gerald L. Hempt. 41. Section 12, Max C. Hempt Trust, provides for an equitable allocation of the Estate taxes, among the beneficiaries to include the recipients of the Hempt Bros Shares. Under the 2012 Federal law, Mrs. Hempt has a unified credit of $5,120,000.00 of which she has used $1,000,000.00, leaving a remaining balance of $4,120,000.00, a portion of which will be used by Mrs. Hempt in filing her gift tax return as a result of her renunciation. Under current law, in 2013 the unified credit will reduce to $ 1,000,000.00. There is expectation that in 2013 or thereafter the unified credit in effect on January 1, 2013 will be revised. It is possible that Mrs. Hempt's 2012 gift as described herein, will receive a disportionate share of the unified credits in effect when she dies; therefore, Section 12 should require the consideration of the gift tax as well as the estate tax, resulting under Trust A-I at Mrs. Hempt's death (i.e. whether the estate tax return preparation requires that the lifetime gifts to include that renunciation of her interest in Trust A- ll has to be added back in calculation of the estate tax resulting in "off the top use" of the unified credit by her gift. Further considerations are changes in the unified credit between 2012 and that in effect in the year of Mrs. Hempt's death as well as different valuation dates should be used, i.e., the date of her gift of Hempt Bros. Shares and the date of Mrs. Hempt's death and any other consideration reasonably necessary to achieve the purpose that the earlier gift is factored into the equitable allocation determination called for in Section 12 of Trust A-I. 10 WHEREFORE, the Petitioners respectfully request that the Court grant the following relief: A. An Order directing the division of Trust A into Trust A-I and Trust A-II with A-11 to hold only 1,751.5 shares of Hempt Bros. Inc. Shares and the acceleration of the remainder interest in Trust A-II due to the renunciation of Mrs. Hempt's preceding lifetime interest, and the consequent termination of Trust A-II in favor of Mr. Hempt's son, Gerald L. Hempt if living and if not then living to his issue. B. An Order directing that, upon Mrs. Hempt's death, Gerald L. Hempt, or his estate if he is not living, shall be responsible to pay a fair and equitable portion of the transfer taxes (as described in Section 12 of Trust A-I as modified by Paragraph 41 above). C. An Order directing that, if Mrs. Hempt dies within one (1) year of her renunciation and inheritance tax is due on her deemed gift to Gerald L. Hempt of Hempt Bros. Shares, that Gerald L. Hempt, or his estate if he is not living, shall be liable for such inheritance tax. D. Such other relief as the Court deems just and proper. Count V (Modification of the Max C. Hempt Trust) 42. If the Court grants the relief requested, then Mr. Hempt's son Gerald L. Hempt will have received his one-half of the Hempt Bros. Shares and upon Mrs Hempt's death, all of the remaining Hempt Bros. Shares in Trust A-I should be distributed to George F. Hempt's male issue, per stirpes, or if none, then to Gerald L. Hempt, if he is living, or if he is not living, to his male issue, per stirpes. Petitioners believe it would be best for the Court to enter an order specifically stating the foregoing shall apply to the remaining Hempt Bros. Shares (or proceeds reasonably traceable thereto) in Trust A-I at Mrs. Hempt's death WHEREFORE, the Petitioners respectfully request that the Court grant the following relief: A. An Order modifying Trust A-1 to provide that Hempt Bros. Shares held in Trust A-I upon Mrs. Hempt's death, or proceeds reasonably traceable thereto, shall be distributed per stirpes to George F. Hempt's then living male issue, or if none, to Gerald L. Hempt, or if he is not living, to Gerald L. Hempt's then living male issue, per stirpes. B. Such other relief as the Court deems just and proper. [Signatures appear on next page] 11 Respe(Mully submitted, MINE S ALLACE & NURICK' L c, , By: ' ichard W. Stevenson/ ttorney I.D. No. 7120 100 Pine Street P.O. Box 1160 Harrisburg, PA 17108 Telephone (717) Attorney for Petitioner, Martha D. Hempt MARTSON DEARDORFF WILLIAMS OTTO GILROY & FALLER ~ ff l ' V. By' Ivo V. Otto, III Attorney I.D. No. 27763 Ten East High Street Carlisle, PA 17013 Telephone (717) 243-3341 Attorney for Petitioner, Gerald L. Hempt JOHNSON, DUFFIE, STEWART & WEIDNER, P.C. By: J,.er y R. Duffi orney I.D. No. 9601 301 Market Street P.O. Box 109 Lemoyne, PA 17043-0109 j Telephone (717) 761-4540 Attorney for Petitioner, Gerald L. Hempt i h Dated: December 26. 2012 I 1' Respectfully submitted, McNEES WALLACE & NURICK, LLC By: Richard W. Stevenson Attorney I.D. No. 7120 100 Pine Street P.O. Box 1160 Harrisburg, PA 17108 Telephone (717) Attorney for Petitioner, Martha D. Hempt MARTSON DEARDORFF WILLIAMS OTTO GILROY & F LLER By: No V. Otto, Attorney I.D. No. 27763 Ten East High Street Carlisle, PA 17013 Telephone (717) 243-3341 Attorney for Petitioner, Gerald L. Hempt JOHNSON, DUFFIE, STEWART & WEIDNER, P.C. r By: Jerry R. Du Attorney I.D. No. 9601 301 Market Street P.O. Box 109 Lemoyne, PA 17043-0109 Telephone (717) 761-4540 Attorney for Petitioner, Gerald L. Hempt Dated: December 26, 2012 12 VERIFICATION I, Martha D. Hempt, Petitioner, verify that the statements made in this Petition are true and correct to the best of my personal knowledge, or information and belief. I understand that false statements herein are made subject to the penalties of 18 Pa. C.S. §4904 relating to unsworn falsification to authorities; I verify that all the statements made in the foregoing are true and correct and that false statements may subject me to the penalties of 18 Pa. C.S. §4804. Ac~ Martha D. Hempt, Petitioner Date: 13 VERIFICATION I, Gerald L. Hempt, Petitioner, verify that the statements made in this Petition are true and correct to the best of my personal knowledge, or information and belief. I understand that false statements herein are made subject to the penalties of 18 Pa. C.S. §4804 relating to unsworn falsification to authorities; I verify that all the statements made in the foregoing are true and correct and that false statements may subject me to the penalties of 18 Pa. C.S. §4804. Gerald-L. Hempt, Peti n Date: :531503 14 IN RE: TRUST A ESTABLISHED PURSUANT ) COURT OF COMMON PLEAS TO THE ESTATE PLAN AGREEMENT ) CUMBERLAND COUNTY, PENNSYLVANIA OF TRUST OF MAX C. HEMPT ) MARTHA D. HEMPT, Beneficiary and ) GERALD L. HEMPT, Beneficiary and as ) ORPHAN'S COURT DIVISION Trustee of the Trust A established pursuant ) to the Estate Plan Agreement of Trust of ) Max C. Hempt dated January 29, 1987 ) NO. 2012 - Petitioners, ) EXIMIT A ACCEPTANCE OF SERVICE AND CONSENT TO RELIEF REQUESTED (MARTHA D. HEMPT) THE UNDERSIGNED, MARTHA D. HEMPT, an adult beneficiary of Trust A, created pursuant to the Estate Plan Agreement of Trust, dated January 29, 1987, does hereby acknowledge, join and consent to the following: 1. Receipt of Petition. Acknowledge receipt of the Petition of Martha D. Hempt and Gerald L. Hempt, Petitioners, dated as of December 24, 2012 ("Petition"). 2. Consent. Consent to the actions requested in the Petition as follows: 15 A. That Trust A be severed into Trust A-I and Trust A-II and providing that Trust A-II (consisting of 1,751.5 shares of Hempt Bros. Inc. stock), after division, be terminated by the Court, B. That the Renunciation of Martha D. Hempt's life interest with respect to Trust A-II be approved by the Court. C. That Gerald L. Hempt's remainder interest in Trust A-II be accelerated and that Trust A-II be terminated. D. Following termination of Trust A-II that the 1,751.5 shares of Hempt Bros. Inc. stock be transferred to Gerald L. Hempt. E. That Section 12, Trust A, be modified with regard to the proportionate allocation of transfer taxes to reflect the foregoing. IN WITNESS WHEREOF, the Undersigned has executed this Acceptance of Service and Consent to Relief Requested this day of December, 2012. S g d, Sealed and vexed the Presence of 4zL--, ` (SEAL) MARTHA D. HEMP" INRE: TRUST A ESTABLISHED PURSUANT COURT OF COMMON PLEAS TO THE ESTATE PLAN AGREEMENT CUMBERLAND COUNTY, PENNSYLVANIA OF TRUST OF MAX C. HEMPT MARTHA D. HEMPT, Beneficiary and GERALD L. HEMPT, Beneficiary and as ORPHAN'S COURT DIVISION Trustee of the Trust A established pursuant to the Estate Plan Agreement of Trust of Max C. Hempt dated January 29,1987 NO. 2012- Max EXHIBIT B ACCEPTANCE OF SERVICE AND CONSENT TO RELIEF REQUESTED (GERALD L. HEMPT) THE UNDERSIGNED, GERALD L. HEMPT, an adult beneficiary of Trust A, created pursuant to the Estate Plan Agreement of Trust, dated January 29, 1987, does hereby acknowledge, join and consent to the following: 1. Receipt of Petition. Acknowledge receipt of the Petition of Martha D. Hempt and Gerald L. Hempt, Petitioners, dated as of December 24, 2012 ("Petition"). 2. Consent. Consent to the actions requested in the Petition as follows: A. That Trust A be severed into Trust A-I and Trust A-II and providing that Trust A-II (consisting of 1,751.5 shares of Hempt Bros. Inc. stock), after division, be terminated by the Court. B. That the Renunciation of Martha D. Hempt's life interest with respect to Trust A-11 be approved by the Court. C. That Gerald L. Hempt's remainder interest in Trust A-1I be accelerated and that Trust A-II be terminated. D. Following termination of Trust A-II that the 1,751.5 shares of Hempt Bros, Inc. stock be transferred to Gerald L, Hempt. E. That Section 12, Trust A, be modified with regard to the proportionate allocation of transfer taxes to reflect the foregoing. Pursuant to Section 7723(9) PEF Code, a person is deemed to represent the person's minor and unborn descendants with regard to any matter relating to the administration of a trust provided the person is notified of the representation and does not decline the representation in a writing delivered to the trustee within sixty (60) dates of receiving such notice. The undersigned acknowledges and agrees that this Acceptance of Service and Consent to Relief Request serves as such written notice and that by signing this Acceptance of Service and Consent to Relief Request he is agreeing to such representation and is waiving his right to decline such representation, I i IN WITNESS WHEREOF, the Undersigned has executed this Acceptance of Service and Consent to Relief Requested this day of December, 2012, Sighed, S'erded curd D livered In the Presence of: " r (SEAL) GERALD L. HE IN RE: TRUST A ESTABLISHED PURSUANT COURT OF COMMON PLEAS TO THE ESTATE PLAN AGREEMENT CUMBERLAND COUNTY, PENNSYLVANIA OF TRUST OF MAX C. HEMPT MARTHA D. HEMPT, Beneficiary and GERALD L. HEMPT, Beneficiary and as ORPHAN'S COURT DIVISION Trustee of the Trust A established pursuant to the Estate Plan Agreement of Trust of Max C. Hempt dated January 29,1987 NO. 2012- Petitioners, EXHIBIT C ACCEPTANCE OF SERVICE AND CONSENT TO RELIEF REQUESTED (MARIAN H. SEMOFF) THE UNDERSIGNED, MARIAN H, SEMOFF, an adult beneficiary of Trust A, created pursuant to the Estate Plan Agreement of Trust, dated January 29, 1987, does hereby acknowledge, join and consent to the following: 1. Receipt of Petition. Acknowledge receipt of the Petition of Martha D. Hempt and Gerald L. Hempt, Petitioners, dated as of December 24,2012 ("Petition"). 2. Consent. Consent to the actions requested in the Petition as follows: A. That Trust A be severed into Trust A-I and Trust A-II and providing that Trust A-II (consisting of 1,751.5 shares of Hempt Bros. Inc. stock), after division, be terminated by the Court. B. That the Renunciation of Martha D. Hempt's life interest with respect to Trust A-II be approved by the Court. C. That Gerald L. Hempt's remainder interest in Trust A-II be accelerated and that Trust A-II be terminated. D. Following termination of Trust A-II that the 1,751.5 shares of Hempt Bros. Inc. stock be transferred to Gerald L. Hempt. E. That Section 12, Trust A, be modified with regard to the proportionate allocation of transfer taxes to reflect the foregoing. IN WITNESS WHEREOF, the Undersigned has executed this Acceptance of Service and Consent to Relief Requested this +k day of December, 2012. Signed, Sealed and Delivered In the Presence of: L-- `171 a A--( ~ (SEAL) H. SEMOFF INRE: TRUST A ESTABLISHED PURSUANT COURT OF COMMON PLEAS TO THE ESTATE PLAN AGREEMENT CUMBERLAND COUNTY, PENNSYLVANIA OF TRUST OF MAX C. HEMPT MARTHA D. HEMPT, Beneficiary and GERALD L. HEMPT, Beneficiary and as ORPHANS COURT DIVISION Trustee of the Trust A established pursuant to the Estate Plan Agreement of Trust of Max C. Hempt dated January 29,1987 NO. 2012- Max EXHIBIT D ACCEPTANCE OF SERVICE AND CONSENT TO RELIEF REQUESTED (MARTHA A. BAIR) THE UNDERSIGNED, MARTHA A. BAIR, an adult beneficiary of Trust A, created pursuant to the Estate Plan Agreement of Tmst, dated January 29, 1987, does hereby acknowledge, join and consent to the following: 1. Receipt of Petition. Acknowledge receipt of the Petition of Martha D. Hempt and Gerald L. Hempt, Petitioners, dated as of December 24,2012 ("Petition"). 2. Consent. Consent to the actions requested in the Petition as follows: A. That Trust A be severed into Trust A-I and Trust A-II and providing that Trust A-II (consisting of 1,751.5 shares of Hempt Bros. Inc. stock), after division, be terminated by the Court. B. That the Renunciation of Martha D. Hempt's life interest with respect to Trust A-11 be approved by the Court. C. That Gerald L. Hempt's remainder interest in Trust A-II be accelerated and that Trust A-II be terminated. D. Following termination of Trust A-11 that the 1,751.5 shares of Hempt Bros. Inc. stock be transferred to Gerald L. Hempt. E. That Section 12, Trust A, be modified with regard to the proportionate allocation of transfer taxes to reflect the foregoing. IN WITNESS WHEREOF, the Undersigned has executed this Acceptance of Service and Consent to Relief Requested this day of December, 2012. Signe Se ed an Delivered In t r enc f r, (SEAL) THA A. BAIR INRE: TRUST A ESTABLISHED PURSUANT COURT OF COMMON PLEAS TO THE ESTATE PLAN AGREEMENT CUMBERLAND COUNTY, PENNSYLVANIA OF TRUST OF MAX C. HEMPT MARTHA D. HEMPT, Beneficiary and GERALD L. HEMPT, Beneficiary and as ORPHANS COURT DIVISION Trustee of the Trust A established pursuant to the Estate Plan Agreement of Trust of Max C. Hempt dated January 29,1987 NO. 2012- Max EXHIBIT E ACCEPTANCE OF SERVICE AND CONSENT TO RELIEF REQUESTED (MAX J. HEMPT) THE UNDERSIGNED, MAX J. HEMPT, an adult beneficiary of Trust A, created pursuant to the Estate Plan Agreement of Trust, dated January 29, 1987, does hereby acknowledge, join and consent to the following: 1. Receipt of Petition. Acknowledge receipt of the Petition of Martha D. Hempt and Gerald L. Hempt, Petitioners, dated as of December 24, 2012 ("Petition"). 2. Consent. Consent to the actions requested in the Petition as follows: A. That Trust A be severed into Trust A-I and Trust A-11 and providing that Trust A-II (consisting of 1,751.5 shares of Hempt Bros. Inc. stock), after division, be terminated by the Court. B. That the Renunciation of Martha D. Hempt's life interest with respect to Trust A-H be approved by the Court. C. That Gerald L. Hempt's remainder interest in Trust A-II be accelerated and that Trust A-11 be terminated. D. Following termination of Trust A-II that the 1,751.5 shares of Hempt Bros. Inc. stock be transferred to Gerald L. Hempt. E. That Section 12, Trust A, be modified with regard to the proportionate allocation of transfer taxes to reflect the foregoing. Pursuant to Section 7723(9) PEF Code, a person is deemed to represent the person's minor and unborn descendants with regard to any matter relating to the administration of a trust provided the person is notified of the representation and does not decline the representation in a writing delivered to the trustee within sixty (60) dates of receiving such notice. The undersigned acknowledges and agrees that this Acceptance of Service and Consent to Relief Request serves as such written notice and that by signing this Acceptance of Service and Consent to Relief Request he is agreeing to such representation and is waiving his right to decline such representation. IN WITNESS WHEREOF, the Undersigned has executed this Acceptance of Service and Consent to Relief Requested this day of December, 2012. Signed, Sealed and Delivered In the Presence of (SEAL) MAX J. HEMPT IN RE: TRUST A ESTABLISHED PURSUANT COURT OF COMMON PLEAS TO THE ESTATE PLAN AGREEMENT CUMBERLAND COUNTY, PENNSYLVANIA OF TRUST OF MAX C. HEMPT MARTHA D. HEMPT, Beneficiary and GERALD L. HEMPT, Beneficiary and as ORPHAN'S COURT DIVISION Trustee of the Trust A established pursuant to the Estate Plan Agreement of Trust of Max C. Hempt dated January 29,1987 NO. 2012- Petitioners, EXHIBIT F ACCEPTANCE OF SERVICE AND CONSENT TO RELIEF REQUESTED (CHRISTINE H. MURPHY) THE UNDERSIGNED, CHRISTINE H. MURPHY, an adult beneficiary of Trust A, created pursuant to the Estate Plan Agreement of Trust, dated January 29, 1987, does hereby acknowledge, join and consent to the following: 1. Receipt of Petition. Acknowledge receipt of the Petition of Martha D. Hempt and Gerald L. Hempt, Petitioners, dated as of December 24, 2012 ("Petition"). 2. Consent. Consent to the actions requested in the Petition as follows: G I F A. That Trost A be severed into Trust A-I and Trust A-It and providing that Trust A -H (consisting of 1,751.5 shares of Hempt Bros. Inc. stock), after division, be terminated by the Court. B. That the Renunciation of Martha D. Hempt's life interest with respect to Trust A4I be approved by the Court. C. That Gerald L. Hempt's remainder interest in Trust A -II be accelerated and that Trost. A-11 be terminated. D. Following termination of Trust A-11 that the 1,751.5 shares of Hempt Bros. Ino. stock be transferred to Gerald L. Hempt. E. That Section 12, Trust A, be modified with regard to the proportionate allocation of transfer taxes to reflect the foregoing. IN WITNBSS WHEREOF, the Undersigned has executed this Acceptance of Service and Consent to Relief Requested this (p day of December, 2012. Signe4 Sealed and Delivered An the Presence of- (SBAL) CHRIAROE H. MURPHY INRE: TRUST A ESTABLISHED PURSUANT COURT OF COMMON PLEAS TO THE ESTATE PLAN AGREEMENT CUMBERLAND COUNTY, PENNSYLVANIA OF TRUST OF MAX C. HEMPT MARTHA D. HEMPT, Beneficiary and GERALD L. HEMPT, Beneficiary and as ORPHANS COURT DIVISION Trustee of the Trust A established pursuant to the Estate Plan Agreement of Trust of Max C. Hempt dated January 29,1987 NO. 2012- Petitioners, EXHIBIT G ACCEPTANCE OF SERVICE AND CONSENT TO RELIEF REQUESTED (GREGORY F. HEMPT) THE UNDERSIGNED, GREGORY F. HEMPT, an adult beneficiary of Trust A, created pursuant to the Estate Plan Agreement of Trust, dated January 29,1987, does hereby acknowledge, join and consent to the following: 1. Receipt of Petition. Acknowledge receipt of the Petition of Martha D. Hempt and Gerald L. Hempt, Petitioners, dated as of December 24, 2012 ("Petition"). 2. Consent. Consent to the actions requested in the Petition as follows: A. That Trust A be severed into Trust A-I and Trust A-II and providing that Trust A-II (consisting of 1,751.5 shares of Hempt Bros. Inc. stock), after division, be terminated by the Court. B. That the Renunciation of Martha D. Hempt's life interest with respect to Trust A-11 be approved by the Court. C. That Gerald L. Hempt's remainder interest in Trust A-11 be accelerated and that Trust A-1I be terminated. D. Following termination of Trust A-II that the 1,751.5 shares of Hempt Bros. Inc. stock be transferred to Gerald L. Hempt. E. That Section 12, Trust A, be modified with regard to the proportionate allocation of transfer taxes to reflect the foregoing. IN WITNESS WHEREOF, the Undersigned has executed this Acceptance of Service and Consent to Relief Requested this 26 day of December, 2012. Signe4 Sealed and Delivered In the P\True o (SEAL) GRE R F. HEMP INRE: TRUST A ESTABLISHED PURSUANT COURT OF COMMON PLEAS TO THE ESTATE PLAN AGREEMENT CUMBERLAND COUNTY, PENNSYLVANIA OF TRUST OF MAX C. HEMPT MARTHA D. HEMPT, Beneficiary and GERALD L. HEMPT, Beneficiary and as ORPHANS COURT DIVISION Trustee of the Trust A established pursuant to the Estate Plan Agreement of Trust of Max C. Hempt dated January 29,1987 NO. 2012- Max EXIIIBIT H ACCEPTANCE OF SERVICE AND CONSENT TO RELIEF REQUESTED (ERIC W. BAIR) THE UNDERSIGNED, ERIC W. BAK an adult beneficiary of Trust A, created pursuant to the Estate Plan Agreement of Tn>_st, dated January 29, 1987, does hereby acknowledge, join and consent to the following: 1. Receipt of Petition. Acknowledge receipt of the Petition of Martha D. Hempt and Gerald L. Hempt, Petitioners, dated as of December 24, 2012 ("Petition"). 12. Consent. Consent to the actions requested in the Petition as follows: A. That Trust A be severed into Trust A-I and Trust A-H and providing that Trust A-11 (consisting of 1,751.5 shares of Hempt Bros. Inc. stock), after division, be terminated by the Court. B. That the Renunciation of Martha D. Hempt's life interest with respect to Trust A-11 be approved by the Court. C. That Gerald L. Hempt's remainder interest in Trust A-H be accelerated and that Trust A-II be terminated. D. Following termination of Trust A-lI that the 1,751.5 shares of Hempt Bros. Inc. stock be transferred to Gerald L. Hempt, E. That Section 12, Trust A, be modified with regard to the proportionate allocation of transfer taxes to reflect the foregoing. Pursuant to Section 7723(9) PEF Code, a person is deemed to represent the person's minor and unborn descendants with regard to any matter relating to the administration of a trust provided the person is notified of the representation and does not decline the representation in a writing delivered to the trustee within sixty (60) dates of receiving such notice. The undersigned acknowledges and agrees that this Acceptance of Service and Consent to Relief Request serves as such written notice and that by signing this Acceptance of Service and Consent to Relief Request he is agreeing to such representation and is waiving his right to decline-such representation. IN WITNESS WHEREOF, the Undersigned has executed this Acceptance of Service and Consent to Relief Requested this day of December, 2012. Signed, Sealed and Delivered In the Presence of (SEAL) ERIC W. SAIR INRE: TRUST A ESTABLISHED PURSUANT COURT OF COMMON PLEAS TO THE ESTATE PLAN AGREEMENT CUMBERLAND COUNTY, PENNSYLVANIA OF TRUST OF MAX C. HEMPT MARTHA D. HEMPT, Beneficiary and GERALD L. HEMPT, Beneficiary and as ORPHANS COURT DIVISION Trustee of the Trust A established pursuant to the Estate Plan Agreement of Trust of Max C. Hempt dated January 29,1987 NO. 2012- Max EXHIBIT I ACCEPTANCE OF SERVICE AND CONSENT TO RELIEF REQUESTED (ALLISON A. BAIR) THE UNDERSIGNED, ALLISON A. BAIR, an adult beneficiary of Trust A, created pursuant to the Estate Plan Agreement of Trust, dated January 29, 1987, does hereby acknowledge, join and consent to the following: 1. Receipt of Petition. Acknowledge receipt of the Petition of Martha D. Hempt and Gerald L. Hempt, Petitioners, dated as of December 24, 2012 ("Petition"). 2. Consent Consent to the actions requested in the Petition as follows: A. That Trust A boo s d into Trua A-1 and. Trust -H and providing the Trot A--11 (consisting of 1,751.5 abru~ ofIlempt Bros..bo. stock), aim division., be #ennina d by the Court. B. Th& the Reminciation of Martha D. Hempt's life in ftmt with poet to Trust A-11 be, approves by the Court. C That Bald L. Hits rmainder intmst are 'rust A-11 be, aomlerated and that TruA .A-U be twminated. D. Following termin im of Trust A-11 that the ls751.5 shams of1Um$ Bros. -no, stack be transferred to Gerald L. Hmpt. T. That Section 12, TnW A, be modified with regard to the rartionata al6cafl a ofttansfer taxes to reflect the fGregoing. WfINESS N O , the Underaign has cited this Acre oo of Servi and consent to R,elief'Requested this r~.~... day of]7 =mb-er, 2012. + fgm4 Seated and Delivered the Presence Of 4~- (,S) ALLISON A. BAHL EXHIBIT J Estate Plan Agreement of Trust, dated January 29, 1987 1-28-87 ESTATE PLAN AGREEMENT OF TRUST 1987 BY THIS AGREEMENT, executed on..~ , MAX C. HEMPT, r presently of Cumberland County, Pe' sylvania, as Settlor, hereby establishes a trust, initially for the proceeds of certain policies of insurance, and the Settlor's sons, George F. Hempt and Gerald L. Hempt, hereby agree to hold said proceeds, and such additional property as may be placed in trust hereunder (whether during lifetime or by testamentary act) by the Settlor, the Settlor's wife, or (with the consent of the Trustees) any other person, in trust subject to the terms and conditions set forth below. If either of the Settlor's sons ever is unable or unwilling to serve, or to continue so serving, as a Trustee hereunder, no successor shall be:appointed.to serve in his place, and if ever neither of the Settlor's sons is able or willing so to serve, or to continue so serving, Dauphin Deposit Bank and Trust Company shall serve as Trustee hereunder. No fiduciary hereunder shall be required to furnish bond or other security for the proper performance of his or her duties hereunder. The Trustee(s) hereunder shall serve as guardian(s) of the property of any minor beneficiary hereunder. No individual fiduciary shall be liable for the acts, omissions or defaults of any agent appointed and retained with due care, or of any co-fiduciary. The compensation of any corporate Trustee shall be in accordance with its customary and generally applied fee schedule. 1. Initial Trust Property. The.Settlor is the insured under. the policies of insurance listed in Appendix A hereto. The primary or contingent beneficiaries thereof are the Trustees under this Agreement of Trust. The proceeds of said policies shall form the initial principal of the Trust established herein. 2. DuringSettlor's Lifetime. During the lifetime of the Settlor, the relationship between him and the Trustees shall be as follows: (a) The trust may be revoked by the Settlor by written notice to the Trustees, and in case of such revocation, all property then held in trust shall be given over to him. The trust may be altered or amended by agreement between the Settlor and the Trustees. (b) All incidents of ownership in the aforementioned policies, including but not limited to the right to change beneficiaries, shall at all times be held by the Settlor. (c) The Settlor shall at all times have the right to possession and use of said policies without limitation of any type, including the right to sell, pledge, assign, receive the cash surrender value of, or otherwise dispose of, them without any liability to account for the proceeds of.any such - disposition. (d) All premiums on the policies shall be paid by the Settlor, and the Trustees shall not in any way be liable for the failure to make such payments or for any loss in value of the -2- policies which may result from such failure. The Settlor does . not by this agreement in any way obligate himself to make any premium payment, and no such payment may be enforced by the Trustees or any beneficiary hereunder. Any dividends or other receipts on account of said policies shall be the property of the Settlor. 3. Allocation of Assets. The primary purpose for the establishment of this Trust is to provide for the Settlor's wife and family in the event of his decease. The Settlor anticipates that a major portion of his estate may be administered hereunder as a result of bequests to the Trustees contained in his will. Upon the Settlor's death: (a) If the Settlor's wife, Martha D. Hempt, survives him, then the Trustee(s) shall establish Trust A hereunder, governed by Section 4 below, by allocation thereto, from the property held hereunder, including property received from the Settlor's estate, an amount, if any, equal to (i) the minimum amount, after taking into account all deductions other than the marital deduction and applying all credits available, which is necessary as the marital deduction to reduce to the lowest possible amount the federal estate tax payable by reason of the Settlor's death, and any federal generation-skipping tax on any transfer with respect to which the Settlor is the deemed transferor, less (ii) the value of all other assets in the Settlor's gross estate which qualify for the marital deduction and which pass or have passed to his -3- said wife under other provisions of this instrument or otherwise. In determining such amount, all assets involved in the calculation shall be valued at final federal estate tax values, but in funding Trust A, date of distribution values shall be used and only assets that qualify for the marital deduction shall be used. It is intended that the income interest of the Settlor's wife in Trust A shall qualify as a "qualifying interest for life" within the meaning of Section 2456 of the Internal Revenue Code of 1986, as amended, and the Executor(s) of the Settlor's estate, and the Trustee(s) hereunder, are directed to elect to qualify the principal of Trust A as "qualified terminable interest property". The interest of Settlor's wife in Trust A shall qualify for the marital deduction, and any provisions herein which may appear to conflict with or in any way defeat the Settlor's intention to obtain the marital deduction for Trust Ashall be construed or applied to accomplish that intention. (b) The remainder of the property passing hereunder (or, if the Settlor's wife does not survive him, all the property passing hereunder) shall be held as Trust B, governed by Section 5 below. - 14. Trust A. The income and principal of Trust A (if established hereunder) shall be distributed as follows: (a) Income. The Trustees shall pay the net income from Trust A to or for the benefit of the Settlor's wife, for her -4- lifetime, in such installments, but not less frequently than quarterly, as the Trustees may determine. (b) Principal. The Trustees shall pay from time to time from the principal of Trust A to or for the benefit of Settlor's wife such sums as shall in the discretion of the Trustees seem proper for her support, maintenance, and health care or necessary to permit her to maintain a standard of living approximately equal to that maintained by her during the Settlor's lifetime, taking into account such other sources of income, support and estate that may be available to her. (c) After Wife's Lifetime. Upon the death of the Settlor's wife, subject to the proviso below, the remaining principal balance of Trust A shall be added to and considered part of Trust B and shall be administered and distributed under the provisions herein governing Trust B, provided, however, that before making any distribution of Trust A principal under this Subsection 4(c), subject to the provisions of Section 12 hereof, the Trustees shall deduct from the principal of Trust A and pay from time to time, to the Settlor's wife's personal representative (i) an amount equal to the excess, if any, of death taxes payable by reason of-the Settlor's wife's death, over the amount of such taxes which would have been payable if no such taxes were payable by reason of her death with respect to the principal of Trust A, plus (ii) an amount equal to any penalties and interest attributable to such additional -5- taxes. Such payments may be made by the Trustee(s) upon receiving from the Settlor's wife's personal representatives a computation of the amount thereof, certified by her personal representatives to be accurate to the best of their knowledge, in which event the Trustees shall be entitled to rely on such computations. 5. Trust The income and principal of Trust B shall be distributed as follows: (a) Income. The net income from Trust B shall be paid at least annually to or for the benefit of any or all of the Settlor's wife and grandchildren in such proportions or amounts as in the discretion of the Trustees seems proper to provide for their support, maintenance, and health care, for the education of the Settlor's grandchildren, and for the maintenance by the Settlor's wife of the standard of living maintained by her during the Settlor's lifetime, taking into account such other sources of income, support and estate (and, particularly so, such sources of either of his or her parents) that may be available to any beneficiary, and only to the extent that such other sources of income, support and estate are not adequate to provide for such matters. (b) Principal. The Trustee(s) shall from time to time pay such sums from the principal of Trust B to or for the benefit of the Settlor's wife as may in the discretion of the Trustee(s) seem necessary for her support, maintenance and health care, and 6- for the maintenance by the Settlor's wife of the standard of living maintained by her during the Settlor's lifetime, taking into account such other sources of income, support and estate that may be available to her. In determining whether any invasion shall be made for the benefit of the Settlor's wife from the principal of Trust A 'or from the principal of Trust B, such invasion shall be made from Trust A as far as practical. (c) Additional Principal Distributions-. The Trustee(s) may also pay from the principal of Trust B such sums as in the discretion of the Trustee(s) seem proper for the support, maintenance, health care and undergraduate education of any grandchild of the Settlor, until completion of his or her undergraduate education, taking into account the other resources (and, particularly so, the resources of either of his or her parents) of any beneficiary under this Subsection 5(c), and only to the extent such other resources are not adequate to provide for such matters, and, the reasonably anticipated needs and the resources of all the beneficiaries hereunder, provided, however, that each payment to the children of a child of the Settlor under this Subsection 5(c) shall be deemed an advancement to such child (or to his or her issue if he or she is not then living, in making the division of the property held in Trust B pursuant to Subsection 5(e) below), and shall be charged against his or her or their share. -7- (d) Legal Support Obligation. No payment shall be made under Subsections 5(a), 5(b) or 5(c) above which would discharge to any extent the legal obligation of any person for the support of the recipient of such payment. (e) After Wife's Lifetime. Upon the death of the survivor of the Settlor and his wife, the Trustees shall pay the balance held in Trust B, as follows: (i) Any shares of stock of Hempt Bros., Inc., and/or Silver Springs Construction Company, Inc., or any successor corporation(s) thereto, or any assets reasonably traceable thereto, and net income earned thereupon, if such shares of stock have been disposed of prior thereto, shall be distributed equally and outright to George F. Hempt and Gerald L. Hempt. If either of said two persons is not then living, that which he would otherwise have received under this Subsection 5(e)(i) were he then living shall go per stirpes to his male issue who are then living, and if he does not have male issue who are then living, shall i go to the other person of the said George F. Hempt- and Gerald L. Hempt, and if the other of them is not then living, shall go per stirpes to the male issue of the said other of them who is not then living, and if neither of George F. Hempt and Gerald L. Hempt is then _g_ living and neither is then survived by male issue of himself, all property subject to this Subsection 5(e)(i) shall pass with the remainder under Subsection 5(e)(ii).below. If any beneficiary under this Subsection 5(e)(i) is under the age of thirty (30) years, his share shall be held for him in a separate trust hereunder, under the terms of Section 6 below. (ii) The remainder of Trust B shall be distributed per stirpes to the Settlor's issue, provided, however, that if any such issue, is then- under the age of thirty (30) years, his or her share shall be held for him or her in a separate trust hereunder, under the terms of Section 6 below. 6. Separate Trusts. The income and principal of a separate trust in which a share in Trust B is held for a beneficiary pursuant to the terms of Subsection 5(e) above shall be distributed as follows: (a) Income. The income shall be distributed at least quarterly to or for the benefit of the beneficiary. No payment shall be made under this Subsection 6(a) which would discharge to any extent the legal obligation of any person for the support of the beneficiary. (b) Principal. The Trustee(s) shall pay from the principal such sums to or for the benefit of any or all of the beneficiary and his or her issue as in the discretion of the -9- Trustees seems proper for their support, maintenance, health care, and education, and such sums to or for the benefit of the beneficiary as in the discretion of the Trustees seems proper to help establish him or her in a business or profession or acquire or furnish a home for him or her, taking into account the other sources of income, support and estate that are available to the distributee, the reasonably anticipated needs and resources of the beneficiary and his or her issue, their income and estate tax brackets, the desirability of the transaction (if any), and the possible application of any generation-skipping tax. No payment shall be made under this Subsection 6(b) which would discharge to any extent the legal obligation of any person for the support of the distributee. (c) Distribution of Separate Trust, (i) When such beneficiary shall have attained the age of twenty-five (25) years, the Trustees shall distribute to him or her at his or her written request one half (1/2) of the remaining principal balance then held in his or her separate trust; and when such beneficiary shall have attained the age.of thirty-{30) years, the Trustee(s) shall distribute to him or her at his or her written request the entire balance held in his or her separate trust. 10 - (ii) If such beneficiary should die before making proper request for the. entire balance in his or her separate trust, then the entire balance in his or her separate trust shall at his or her death be distributed, outright or in trust, in such sums or proportions as such beneficiary may direct in his or her last will, expressly referring to his or her separate trust hereunder, but only among the Settlor's issue; and to the extent that such beneficiary shall fail to exercise effectively his or her limited power of appointment hereunder, the aforementioned balance in his or her separate trust shall then be distributed per stirpes to his or her issue, or, if no such issue . survive him or her, per stirpes to the issue of his or her parent who was a child or more remote descendant of the Settlor, or, if no such issue survive him or her, per stirpes to the issue of his or her grandparent who was a child or more remote descendant of the Settlor or, if no such issue survive him or her, per stirpes to the Settlor's issue, with the__. share of any of such issue for whom property is then held in or payable to a separate trust under this Section 6 being added to such separate trust. - 11 - a (d) Disposition Upon Application of Rule Against Perpetuities. Notwithstanding Subsection 6(c) above, if during the lifetime of a person for whom a separate trust under this Section 6 was established the interest of such person therein becomes void under the applicable rule against perpetuities, then the balance in such separate trust shall then be distributed outright to such person. 7. Survival Clauses. If the Settlor and his wife should die under such circumstances that it cannot be determined which of them survived, the Settlor's wife shall be deemed to have survived him for all purposes hereunder. If any other beneficiary hereunder should die within sixty (60) days after the Settlor, or.within sixty (60) days after any other person the survival of whom determines his or her rights hereunder, then such beneficiary shall be deemed to have predeceased the 5ettlor or such other person for all purposes hereunder. 8. Powers. In addition to such other powers and duties as may be granted elsewhere herein or which may be granted by law, the fiduciaries hereunder shall have the following powers and duties, without the necessity .of notice to'or consent by any Court: (a) To retain all or any part of the property of--the Settlor, real or personal, in the form in which it may be held at the time of its receipt, including any closely held business in which the Settlor has an interest and any stock of any corporate fiduciary hereunder, as long as in the exercise of their 12 - discretion it may be, advisable so to do, notwithstanding that said property may not be of a character authorized by law, provided, however, that upon written request by the Settlor's spouse, they shall within a reasonable time make productive of income any interest in property (however and whenever acquired) held in Trust A hereunder. (b) To invest and reinvest any funds held hereunder in any property, real or personal, including, but not by way of limitation, bonds, preferred stocks, common stocks, and other securities of domestic or foreign corporations or investment trusts, mortgages or mortgage participations, and common trust funds, even though such property would not be considered appropriate or legal for a fiduciary apart from this provision. (c) To sell, convey, exchange, partition, give options to buy or lease upon; or otherwise dispose of any property, real or personal, at any time held by them, with or without order of court at their option, at public or private sale or otherwise, for cash or other consideration or for such credit terms as they think proper, and upon such terms and for such prices as they may determine, and to convey such property free of all trusts. (d) To borrow money from any person, including any fiduciary hereunder, for any purpose in connection with the administration hereof, to execute promissory notes or other obligations for amounts so borrowed, and to secure the payments - 13 - of such amounts by mortgages or pledges of any property, real or personal, which may be held hereunder. (e) To make loans, secured or unsecured, in such amounts, upon such terms; at such rates of interest, and to such persons, firms or corporations as they may deem advisable. (f) To renew or extend the time for payment of any obligation, secured or unsecured, payable to or by them, for as long a period of time and on such terms, as. they may determine, and to adjust, settle and arbitrate claims or demands in favor of or against them. (g) In dividing or distributing any property, real or personal, included herein, to divide or distribute in cash, in kind, or partly in cash and partly in kind. (h) To hold, manage, and develop any real estate which may be held by them at any time, to mortgage any such property in such amounts and on such terms as they may deem advisable, to lease any such property for such term or terms, and upon such conditions and rentals as they may deem advisable, whether or not -the term of any such lease shall exceed the period permitted by law or the probable period of retention under,this instrument; to make repairs, replacements and improvements, structural and otherwise, in connection with any such property, to abandon any such property which they may deem to be worthless or not of sufficient value to warrant keeping or protecting, and to permit - 14 - any such property to be lost by tax sale or any other proceedings. (i) To employ such brokers, banks, custodians, investment counsel, attorneys, and other agents, and to delegate to them such duties, rights and powers as they may determine, and for such periods as they think fit. (j) To register any securities at any time in their names as fiduciary, or in the names of nominees, with or without indicating the trust character of the securities so registered, (k) With respect to any securities held hereunder, to vote upon any proposition or election at any meeting of the person or entity issuing such securities, and to grant proxies, discretionary or otherwise, to vote at any such meeting; to join or become a party to any reorganization, readjustment, merger, voting trust, consolidation or exchange, and to deposit ariy such securities with any committee, depository, trustee or otherwise, and to pay out of the trust created herein, any fees, expenses, and assessments incurred in connection therewith; to exercise conversion, subscription or other rights, and to receive or hold any new securities issued as a result of any such reorganization, readjustment, merger, voting trust, consolidation, exchange or exercise of conversion, subscription or other rights and generally to take all action with respect to any such securities as could be taken by the absolute owner thereof. - 15 - (1) To engage in sales, leases, loans, and other transactions with the estate of the Settlor, the estate of his wife, or any trust established by either of them, even if they are also fiduciaries or beneficiaries thereof. (m) To make all necessary proofs of death under the insurance policies of which they are the beneficiary, to execute any receipts for the proceeds and to institute any action to collect said proceeds and to make adjustments of any claim thereunder, provided, however, that they need not institute any action unless they shall have been indemnified against all expenses and liabilities to which they may. become subject as a result thereof. If, however, they desire to institute such action without indemnification, they are hereby authorized to be reimbursed for all expenses and liabilities incurred as a result thereof from any amounts which may be held in trust hereunder then or thereafter. .(n) To operate, own, or develop any business or property held hereunder in any form, including without limitation sole proprietorship, limited or general partnership, corporation, association, tenancy in common, condominium, or any other--, whether or not they have restricted or no management rights, as they in their discretion think best. - 16 - 9. Business Interests. In dealing with the stock of any close corporation, any partnership, or any other business interest forming a part of any trust hereunder, the Settlor authorizes the Trustees: (a) To disregard any principal of investment diversification, and to retain any part or all of such interest so long as the Trustees consider it advisable to do so; (b) To sell any part or all of such interest at such time or times, for such prices, to such persons (including persons who are Trustees or beneficiaries hereunder), and on such reasonable terms and conditions as they may think desirable; (c) To do anything that may seem advisable with respect to the operation or liquidation of any such business or. any change in the purpose, nature or structure of any such business; (d) To delegate authority to any director, shareholder, manager, agent, partner or employee of any such business, and to approve payment from the business of adequate compensation to any such person, including any such person who is as Trustee hereunder; (e) To cause any such business to borrow money from the banking department of any corporate trustee hereunder, regardless of any rule of law with respect to conflict of interest; and (f) To make additional investments in any such business if such action seems desirable for the best interests of the estate of the Settlor and the beneficiaries thereof. 17 - In short, the Settlor intends that in making decisions hereunder, the Trustees shall have the same freedom of action as the Settlor had during his lifetime. The fact that any Trustee under this Agreement of Trust may be interested in any such business as director, shareholder, manager, agent, partner, employee or creditor, shall not constitute an adverse or conflicting interest, and the acts of such Trustee shall be judged as if he had no interest in the business. No Trustee shall be liable to anyone for anything done or not done by any other Trustee or by any beneficiary, except for willful or wanton negligence. In short, the Settlor intends that in making decisions hereunder, the Trustee shall have the same freedom of action that the Settlor had at the time of entering into this Agreement of Trust. 10. Spendthrift Clause. No interest (whether in income or principal, whether or not a remainder interest, and whether vested or contingent) of any beneficiary hereunder shall be stib,ject to anticipation, pledge, assignment, sale or transfer in any manner, nor shall any beneficiary have power in any manner to charge or encumber his or her said interest, nor shall the said interest of any beneficiary be liable or subject in any manner while in the possession of the fiduciaries for any liability of such beneficiary, whether such liability arises from his debts, contracts, torts, or other engagements of any type. - 11. Facility of Payments for Minors or Incomoetents. Any amounts which are payable or distributable hereunder to a minor or incompetent may, at the discretion of the fiduciaries, be paid or distributed to the parent or guardian of such minor or incompetent, to the person with whom such minor 18 - i or incompetent resides, or directly to such minor or incompetent, or may be applied. for the use or benefit of such minor or incompetent. 12. Taxes. Estate, inheritance and succession taxes that may have been assessed in consequence of the Settlor's death, of whatever nature and by whatever jurisdiction imposed, whether or not on account of property passing hereunder, other than generation-skipping taxes, may on request of the Settlor's personal representatives and consent of the Trustees be paid out of the principal of Trust B hereunder, as if said taxes were expenses of administration thereof, and all property passing to Trust A shall be free and clear thereof, provided, however, that no such taxes shall be paid out of assets that are not includible in the federal gross estate of the Settlor, and, provided, further, however, that the aforegoing provisions of this Section 12 notwithstanding, and of Subsection 4(c) above notwithstanding, all death taxes payable because of the death of the Settlor or his wife which / are fairly and reasonably apportionable against the assets which are the subject of Subsection 5(e)(i) above shall be apportioned against such assets and the beneficiary(s) of such assets, and shall be paid equitably by such beneficiary(s) as a condition of such beneficiary(s) receiving such assets under Subsection 5(e)(i) above. The apportionment of such death taxes shall be made in accordance with 'the principles stated in Chapter 37--.of the Pennsylvania Probate, Estates, and Fiduciaries Code as in effect on the date of this Agreement of Trust. 13. Gender. Unless the context indicates otherwise, any use of the either gender herein shall also include the other gender. _ 19 _ 14. Law Governing. This Trust shall be administered and interpreted in accordance with the laws of the Commonwealth of Pennsylvania. IN WITNESS WHEREOF, the Settlor and the Trustee(s) have hereunto set their hands and seals on the date first mentioned above. WITNESS: SETTLOR: (SEAL) AAX' C . AEMPT TRUSTEES: f4~~ ~ (SEAL) E, fJ V SEAL) GERALD L. HEMPT f -20- Mstavv Page 1 408 So.2d 849 (Cite as: 408 So.2d 849) P ones. District Court of Appeal of Florida, Third District 21 Remainders 333 E~=S Matthew WEINSTEIN, as Guardian Ad Litem of the unborn children of David L. Mackey, etc., and Secu- 333 Remainders rity Trust Company and Eric C. Van Enter, as Trus- 333k5 k. Acceleration of Remainder. Most Cited tees of Trust under Modified Trust Agreement of Ella Cases C. Levis, Appellants, V Doctrine of "acceleratio refers to the hastening Leslie L. MACKEY, a minor, Jennifer L. Mackey, a of the owner of ture ' erest towards a status of minor, David L. Mackey, Jr., a minor, and Kirk B. present possession or enjoyment by reason of the Mackey, a minor, Appellees. failure of the preceding estate; doctrine is generally used when the temporary interest, preceding the re- Nos. 80-2257, 80-2348. mainder, fails to come into existence, or terminates in Jan. 26, 1982. some manner for which the creator did not provide after having come into existence. Trustees brought action for construction of effect of beneficiaries' disclaimers and for instructions as to u Remainders 333 E>;7~'5 proper disposition. The Circuit Court, Dade County, Ellen Morphonios Gable, J., held that disclaimer by 333 Remainders two persons who had life estate in net income from ^333k5 k. Acceleration of Remainder. Most Cited the trust accelerated the remainder interest and closed Cases the class of remaindermen and guardian ad litem and the trustees appealed. The District Court of Appeal, Rules relating to the doctrine of acceleration ap- Schwartz, J., held that (1) gift of principal of the ply whether the conveyance is of realty or personalty trust to children of settlor's nephew was a vested re- er in them, subject to proportionate diminish- fand whether it occurs by deed, will, inter vivos trans- maindment by the birth of additional children, and (2) re- mainder to a class is both accelerated and closed up- on termination of the preceding life estate. 141 Trusts 390 140(3) Aff=ed. 390 Trusts 39011 Construction and Operation West Headnotes 390H Estate or Interest of Trustee and of Cestui Que Trust 1 - 390kl39 Extent of Estate or Interest of u Remainders 333 '5 Cestui Que Trust 390k140 Express Trusts in General 333 Remainders 390k140(3) k. Estate or Interest of 333k5 k. Acceleration of Remainder. Most Cited Remaindermen. Most Cited Cases Cases Gift of the principal of the trust to the children of Disclaimer of husband and wife of their present the settlor's nephew, who had a life estate in the in- interest in income from a specified portion of the come along with his wife, was a vested remainder in corpus accelerated the remainder interest of their those children which had already been born, with children, closing the class, so that the remainder in- their shares subject to proportionate diminishment by terest was immediately distributable to the then- the birth of additional children; that type of interest is living children, to the exclusion of any after-born 0 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. Page 2 408 So.2d 849 (Cite as: 408 So.2d 849) described as a "remainder vested subject to open." his wife for the duration of their natural lives with the remainder to go to the children, "including children u Remainders 333 ~5 born after my death" did not show an intent on the part of the settlor that the acceleration of the remain- 333 Remainders der interest by the disclaimer of the interest of the 333k5 k. Acceleration of Remainder. Most Cited nephew and his wife should not close the class, lim- Cases ited to the then-born children. Disclaimer of prior interest accelerates a remain- *850 Matt Weinstein, South Miami, Hyzer, Knight & der interest subject to open with respect to the exist- Lund and Eric C. Van Enter and George L. Knight, ing class members and closes the class as of that Miami, for appellants. time, thus eliminating any right of the unborn. Giles, Hedrick & Robinson and Eugene B. Cawood, j6j Remainders 3335 Orlando, for appellees. 333 Remainders Before HENDRY, SCHWARTZ and DANIEL S. PEARSON, JJ. 333k5 k. Acceleration of Remainder. Most Cited Cases SCHWARTZ, Judge. Remainder to a class, such as the class of chil- L2 In 1973, Ella Levis executed a modified trust ✓ dren or grandchildren, is both accelerated and closed agreement which in part provided that after her death, upon the termination of the preceding life estate. the net income from a specified portion of the corpus, which consisted entirely of personalty, was to be paid "for the duration of their natural lives" to her nephew M Remainders 333 0~'5 Dr. David L. Mackey and his wife, Shirley R. Mackey. Upon the death of the survivor of the 333 Remainders Mackeys, the principal of their share was to be dis- 333k5 k. Acceleration of Remainder. Most Cited tributed to Dr. Mackey's children "including children Cases born after my death, with a predeceased child's issue taking by representation." TNII *851 Miss Levis When acceleration doctrine is arguably applica- died on April 25, 1979 at the age of ninety-three. Dr. ble, the ultimate issue is the settlor's wishes and the Mackey was then forty-two years of age and had four acceleration-closed-class result will not obtain if the children, born between 1965 and 1970. In January, terms of the operative instrument manifest a contrary 1980, both Dr. and Mrs. Mackey executed uncondi-V- intent, tional disclaimers of their right to the income. Shortly 'thereafter, the trustees brought the present action for j8] Trusts 390 G'140(3) a construction of the effect of the disclaimers and instructions as to the proper disposition of the income and principal in question. Over the contrary conten- 390 Trusts lions of the trustees and a guardian ad litem appoint- 390II Construction and Operation ed to represent Dr. Mackey's unborn children, the 390IIEstate or Interest of Trustee and of trial judge ruled that the disclaimers accelerated the?,/ Cestui Que Trust remainder interest so that it was immediately distrib- 390k139 Extent of Estate or Interest of utable to the four living children, to the exclusion of Cestui Que Trust 3901c140 Express Trusts in General any afterbom ones. We affirm that conclusion. 390kl40 3 k. Estate or Interest of Remaindermen. Most Cited Cases FNl. The clause in question had similar provisions for each of Miss Levis' three nephews. In its entirety, it reads as follows: Fact that instrument creating trust and providing for the net income to go to the settlor's nephew and B. Trustees shall divide the remaining two ® 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. Page 3 408 Sold 849 (Cite as: 408 So.2d 849) (2) of the aforesaid five equal parts into ciary, remaindermen included, and such three (3) shares, and shall keep same in- income, principal or other interest shall vested and held in trust for the benefit of not be subject to being taken by the bene- the following named three (3) income ficiary's creditors through any process, beneficiaries-husband and wife where whatsoever. both are named to be considered one-, for the duration of their respective natural QM The issue before us concerns the doctrine lives, to wit, for the benefit of respective- of acceleration, which ly: (a) my nephew Wilson C. Levis, one (1) one-third (1/3) share; (b) my nephew refers to the hastening of the owner of a future Bart L. Mackey and his wife, Eugenia L. interest towards a status of present possession or en- Mackey, together, one (1) one-third (1/3) joyment by reason of the failure of the preceding es- share; and (c) my nephew David L. tate. 2 Simes & Smith, Law of Future Interests (2 Mackey and his wife, Shirley R. Mackey, Ed.), 263, What is Acceleration, Section 791. The together, one (1) one-third share; each of doctrine of acceleration is generally used when the the aforesaid income beneficiaries to be temporary interest, preceding the remainder, fails to referred to hereinafter as the beneficiary, come into existence, or, as in the case sub judice, to wit: with respect to the particular trust coming into existence, terminates in some manner for for his/their benefit; each of the aforesaid which the testator did not provide.... The rationale three one-third shares to be administered given for this rule in 2 Restatement of Property 962, by trustees as a separate trust, but invest- Comment a, Section 231 (1936), is that acceleration ments of the several trusts hereunder, to is in accordance with what is normally to be inferred the extent such is practicable, preferably as the intent of the `conveyor' namely that as each to be combined for the three trusts. Trus- successive interest sought to be created by him ends tees shall, as to each of said trusts: (a) pay or becomes impossible, the next interest in order the net income, from the date of my death, should move up. However, the application of the doc- to the beneficiary, in convenient, not less trine of acceleration must be in furtherance of the frequent than quarterly, installments, the intention of the testator, and never in contravention first such installment to be paid as soon as thereof, will appear to be practicable; (b) upon the death of the beneficiary-where applicable, upon the death of the survivor of husband Ohio National Bank of Columbus v. Adair, 54 and wife-distribute the assets of the par- Ohio St.2d 26, 374 N.E.2d 415, 417 (1978). While ticular trust, absolutely, free and clear of these general principles have become well- any and all trusts, to the children of the established, Jackson v. Exchange National Bank of deceased nephew concerned, including Tampa 152 Fla. 528, 12 So.2d 450 (1943); Murphy children born after my death, with a pre- y Murphy, 125 Fla. 855, 170 So. 856 (1936), the deceased child's issue taking by represen- question of their applicability to a transfer N2N21 of tation the portion of such predeceased the kind involved here is one of initial impression in ✓ child, or, in case such nephew dies with- this state.TN31 out issue, in equal parts, to the other ones of my aforesaid three nephews, or, if ap- FN2. It is clear that the same rules apply plicable, their respective children or fur- whether the conveyance is of realty or per- ther issue, per stirpes, in each instance, in sonalty and whether it occurs by deed, will, case of death issue to take by representa- inter vivos transfer, or, as here, the creation lion, the terms `children' or `issue' as of a trust. L. Simes & A. Smith, The Law of used herein to be construed as meaning Future Interests ss 355, 801 (2d ed. 1956). `lineal descendents of the blood', adopted children, if any, being expressly excluded, FN3. Lowrimore v. First Savings & Trust throughout. No income or principal of, or Co. of Tampa. 102 Fla. 740. 140 So. 891 any other interest in, any trust established 1931 accelerates a vested remainder in a hereunder shall be alienable by its benefi- class of "next of kin" and fixes the members ® 2011 Thomson Reuters, No Claim to Orig. US Gov. Works. Page 4 408 So.2d 849 (Cite as: 408 So.2d 849) of the class as of the date of the renunciation 3. A, owning Blackacre in fee simple absolute, of the life estate by the widow's election of effectively devises Blackacre `to B for life, remainder dower. To that extent, it is like our case. It is to the children of C and their heirs.' C has a child D. unlike it, however, in the fact that the class A dies. B renounces the provision made for him by was apparently subject only to decrease by A's will. More than one year later and prior to B's death, and not, since the parents of the living death C has a child E. D has an estate in fee simple "next of kin" had themselves all died, to absolute in Blackacre. "open" by birth of additional children, as here. We hold that the same rule nonetheless A clear majority of the cases accordingly hold applies. that a remainder to a class, as here, of "children," "grandchildren," or the like, is both accelerated and 4 5 6 The gift of the principal of the trust to closed upon the termination of the preceding life es- the children of Dr. Mackey is a vested remainder in tate. Tomb v. Bardo, 153 Kan. 766. 114 P.2d 320 those who have already been bom, with their share 1941 ; Allen v. Hannum, 15 Kan. 470 (1875); Davis subject to proportionate diminishment by the birth of v. Hilliard. 129 Md. 348, 99 A. 420(1916,); Sherman additional children. As to this type of interest, which v. Baker, 20 RI, 446, 40 A. 11 (1898); Re Davies, is described as a remainder vested subject to open, L. (1957) 4 All.E.R. 52; but cf., Trenton Banking _Co. v. Simes & A. Smith, The Law of Future Interests s 799 Hawley, 7 N.J.Super. 301, 70 A.2d 896 (1950); con- (2d ed. 1956); 2A R. Powell, The Law of Real Prop- tra, Neill v. Bach, 231 N.C. 391. 57 S.E.2d 385 erty s 309(5)(c) (rev.ed. P. Rohan 1977), the general- (1950); Yeaton v. Roberts. 28 N.H. 459 (1854). FN4 ly accepted rule of construction is that a disclaimer of This rule controls our decision here. the prior interest indeed accelerates the remainder interest of the existing class members, and, most sig- FN4. It is important to point out that the cas- nificantly, "closes the class" as of that time, thus es which either, like Yeaton and Neill, apply eliminating any right of the unborn. The principle is a different rule of law or, like Askey v. stated as follows in Restatement of Prop= s 231, Askey, 111 Neb. 406. 196 N.W. 891 (1923)Comment i 0936). End a contrary intention of the conveyer, nevertheless do not ordinarily deny accelera- *852 (W)hen the renounced interest is the only tion altogether. Instead, they hold that the hindrance to the succeeding interest becoming forth- remainder is accelerated, but that the class with a present interest and the succeeding interest is remains open during the term of the preced- limited as a gift to a class in such manner that the ing estate. See Restatement of Property s class can increase its membership only during the 231 Comment i, supra; L. Simes and A. stipulated period of the renounced interest, then such Smith, supra, p. 288. Thus, in this case, the increase in membership is to be construed as having four Mackey children's interest in the corpus been intended to occur only during the actual contin- would be subject to progressive diminish- uance of the attempted prior interest. The renuncia- ment if their father should have other chil- lion of such attempted prior interest prevents the pe- dren. riod during which such increase was intended to be possible from ever existing. The accelerated interest We confess that one of the reasons we of each of the persons who is a member of the class adopt the acceleration-class-closed rule is at the time when the creating conveyance becomes the utter impracticability of this alterna- operative is not subject to being diminished in size by five. It seems clear that the idea of an ac- such class thereafter and during the stipulated period celeration subject to a subsequent partial of the renounced interest opening and admitting new divestiture is an impossible contradiction members. This rule of construction is required by the in terms. While it may be possible for the intent normally to be inferred from a limitation of the existing remaindermen to enter into pos- type described. session subject to a limitation of record in the case of real estate, see Neill v. Bach, Illustration 3 to this section is indistinguishable supra, we are hard put indeed to conceive from this case: of a way in which both interests may be 0 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. Page 5 408 So.2d 849 (Cite as: 408 So.2d 849) simultaneously assured where, as here, only personalty is involved. (The only *853 7 8 It is true, as in every instance in such instance seems to be the 1854 case of which the acceleration doctrine is arguably applica- Yeaton v. Roberts, supra.) If each of the ble, see, Murphy v. Murphy, supra; In re Estate of four young Mackeys immediately receives Rentz 152 So.2d 480 (Fla3d DCA 1963), cert. de- the right to, say, 100 shares of stock, it is nied, 156 So.2d 859 (F1a.1963) , that the ultimate is- entirely unclear as to how an afterborn sue is the settlor's wishes and that the acceleration- child may secure his interest in them. Is he closed-class result will not obtain if the terms of the to maintain an action at law against his operative instrument manifest a contrary intent. Re- four older siblings? Is a subsequent child statement of Property, supra, s 231 at pp. 970-71; 2A to sue the preceding five? If the shares R Powell, supra, s 310(2). We do not agree, howev- have been sold, the proceeds dissipated er, with the appellants' contention that such an intent and an older child is judgment proof, the appears from the statement defining the children who fact that the class remains "open" would were to receive the principal as "including children be meaningless to the newly-born Mackey bom after my death." Fj _N 1 In essence, this expres- who entered it. If, on the other hand, these sion adds nothing to a general description of "chil- rights are protected by sequestering or dren," which itself necessarily includes those bom continuing the trust as to all or part of the after the death of the conveyer. (Indeed, by defmi- assets (the required proportion of which lion, every case which involves an open class is con- would be entirely speculative, since there cerned only with the rights of the afterbom.) But as is no way of knowing how many more we have seen, the rule is that a provision that these children Dr. Mackey may have), there afterbom take at the natural end of a life estate, does would be no real acceleration of the right not affect acceleration and closing when the estate is to the principal at all. In any event, this terminated by means other than actual death.1FN61 approach would engender a welter of un- Surely, the fact that Miss Levis made that intent clear certainty which, as far as possible, the law cannot. serve to evince a contrary desire concerning of property should discourage, The rule the quite different question of whether acceleration favoring early vesting of estates is essen- should result. That something a great deal more is tially based on this consideration. See required is shown by comparing this case to those in Krissoff v First National Bank of Tampa, which such a determinative manifestation of an intent 159 Fla 522, 32 So.2d 315 (1947). Most to bar acceleration has been found. Compare, e.g., significant of all, it may be assumed that Askev v Askev 111 Neb. 406,196 N.W. 891 (1923) Miss Levis, whose intentions are para- (will provided for termination of wife's life estate if mount, see Rice v. Greenberg, 406 So.2d she remarried, but for no distribution until her natural 469 (Fla. 3d DCA 1981) , would not have death); Ohio National Bank of Columbus v. Adair, desired that any such confusion should be supra (comprehensive scheme to delay vesting so as a result of her generosity. to keep property within family for as long as possi- ble); Restatement of ProI22M, supra, ss 232, 233; 2A In any case, the present appellants do not R. Powell, supra, s 310(2), and cases collected. The themselves seek such relief. Their position words "including children born after my death" are is apparently that there should be no ac- not at all comparable and may not be given any such celeration, that the living children should effect receive the income during their parents' lifetime, and that disbursement of the cor- FN5. Since there were no children bom in pus should await the father's natural death. the interim, we need not decide whether as This view has been adopted in but a single celeration is deemed to have occurred and case, Cool v Cool, 54 Ind 225 (1876) the class closed as of the date of Miss Levis' and is accurately said by Simes and Smith death, as is usually the case, 2A R Powell, to be the "construction least likely to be supra, s 309(3), or when the disclaimers followed," s 799, supra, at p. 288. We were filed, as indicated by Lowrimore Y. have no difficulty in rejecting that conten- First Savings & Trust Co. of Tampa, supra. lion as well. © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. Page 6 408 So-2d 849 (Cite as: 408 So.2d 849) / We do note, however, that this language diately distributed to the living children or held in a ✓ may be deemed to have indicated an intent kind of equitable limbo, see note 4, supra, awaiting in favor of the latter rule so that any children Dr. Mackey's natural death and thus the termination born after her death but before acceleration of the possibility-which is only speculative in any would be included in the class. To that ex- case-of his having other children. On this point, we tent, and indulging the usually unmerited must conclude from a consideration of the entire trust presumption that every word in a legal doc- instrument that Miss Levis sought to grant her neph- ument must be given some legal effect, the ew and niece income during their lives simply as a phrase would have served a useful purpose benefit for them, rather than as a means of postpon- without entirely defeating acceleration. ing the distribution of the corpus to the ultimate ob- jects of her bounty, her grandnephews and grand- In fact, however, the phrase was probably nieces. Because, for their own reasons-probably relat- no more than legal boilerplate through ing to post-mortem planning-which are beyond our which the draftsman sought to avoid a ken, the Mackeys do not want that benefit, there is no possible implication, which would not reason for, or, to put it more accurately, Miss Levis have arisen anyway, that the "children" would have no reason to want any subsequent delay were limited to those born before the set- in the distribution and receipt of the principal. See tlor died. We are very loath to ascribe Union National Bank of Charlotte v. Easterby, 236 drastic legal consequences to an insertion N.C. 599, 73 S.E.2d 541 (1952) and cases cited. The which likely owes its existence merely to implementation of his justifiably presumed intent is the scrivener's maxim that one word the basis of and is reflected in the acceleration doc- should not be employed when ten will do trine itself the authorities already cited which pertain as well, to this particular legal situation, and the judgment below. lFN71 It is therefore FN6. Even a description of the remaindermen as those who are "then liv- FN7. Since we base our decision entirely on ing" or who "survive" the life tenant-an a common law principles, we specifically do fortiori situation to this one-may not be suf- not consider whether it might also be re- ficient to express a conveyer's intent that ac- quired by Sec. 689.21, Fla.Stat. (1979), celeration should be precluded and that dis- which deals with disclaimers of interests un- trbution must await the natural death of the der inter vivos trusts. See Sec. 732.801, tenant. 2A R. Powell, supra, s 310(2)(b), Fla.Stat. (1979) (equivalent statute as to cases collected and text at note 12. wills). We point out, but need not resolve, the conflicting indications which stem from In considering the "intent" issue generally, it the facts (a) that, as written, Sec. 689.21(3) must be remembered that, by its very nature, every deals only with the distribution of "the inter- case in which the possibility of acceleration arises est disclaimed"-here, the life interest-rather involves a threshold distortion of the settlor's desires. than the effect of the disclaimer upon the See Restatement of Property, supra, s 231, p. 962. remainder; and (b) that although it generally His wishes as to the use of his property have been tracks the Uniform Disclaimer of Transfers frustrated by an unforeseen and unprovided-for event, Under Nontestamentary Instruments Act, the and the issue then becomes what he would have in- Florida law does not contain the provision in tended to happen when what he intended to happen subsection 3 of the Uniform Act which didn't happen, and what he didn't intend to happen, would achieve the result we adopt today. happened. As has already been intimated, the ques- See Commissioners' Comment to identical tion in this case is not, therefore, whether Miss Levis provision of Uniform Disclaimer of Trans- wanted Dr. *854 Mackey's afterbom children to share fers by Will, Intestacy or Appointment Act, if he and his wife had received the income until they 8 U.L.A. at Supp. 1981, p. 29. / died-the trust clearly says that she did. It is rather V/ whether, after that interest has been disclaimed, the Affirmed FN8 settlor would have wanted the principal to be imme- © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. Page 7 408 So.2d 849 (Cite as: 408 So.2d 849) FN8. We would be remiss if we did not ex- press our appreciation to counsel for all sides for their uniformly excellent oral and written pr tations. F1a.App. 3 Dis , 1982. Weinstein v. key 408 Sold 849 END OF DOCUMENT 0 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.