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Home My WebLink About07-26-13 IN RE: : IN THE COURT OF C�]�MOl��'L � ~` : OF CUMBERLAND ��JNTY� � � ESTATE OF LOTTIE IVY DIXON : PENNSYLVANIA � �� i�=- �, --' � Deceased : �� ..:. . �� ::�..�� -:�� .��. - �,.. �. .� : ORPHANS' COURT �I�I��OI�= W�� "� �"' ...._�. � ,.�, �.._. - ....,�. � :.� . ._�, ,,.., � . � ......._ i_.....4 ...._.. .n .� . �.�.,,_.: . F---- ., .._6 : NO. 21-07-0686 `�, _.. �,.� .' ;;.� ...� �, -;� IN RE: : IN THE COURT OF COMMON PLEAS : OF CUMBERLAND COUNTY, ESTATE OF GEORGE F. DIXON, JR.: PENNSYLVANIA Deceased : : : ORPHANS' COURT DIVISION - � : NO. 21-1994-0754 TRUST UNDER REVOCABLE AGREEMENT DATED AUGUST 19, 1985 WITH LOTTIE IVY DIXON OBJECTIONS OF GEORGE F. DIXON III AND RICHARD E. DIXON TO THE FIRST AND PARTIAL ACCOUNT OF THE TRUST UNDER REVOCABLE AGREEMENT WITH LOTTIE IVY DIXON To the Honorable Court, the Auditing Judge: , AND NOW, this 26th day of July, 2013, George F. Dixon III and Richard E. Dixon, current income beneficiaries and remainder beneficiaries of the aforementioned Trust (hereinafter the "Obj ectants"), hereby file these Obj ections 1 4735110 , � to the First and Partial Account filed by Manufacturers and Traders Trust Company, Corporate Trustee (the "Accountant"), for the following reasons: I. Background 1. Lottie Ivy Dixon died on June 28, 2007 at the age of seventy-nine (79), leaving four children to survive her: George F. Dixon III, Richard : E. Dixon, Marshall L. Dixon and Charlotte Dixon. Mrs. Dixon was preceded in death by her husband, George F. Dixon, Jr. on August 28, 1993. 2. During her lifetime, Mrs. Dixon was the beneficiary of the George F. Dixon, Jr. QTIP Trust (the "QTIP Trust") established by Trust Agreement dated May 16, 1985 and restated August 19, 1985. The Corporate Trustee of the QTIP Trust was and continues to be Manufacturers and Traders Trust Company, successor to Dauphin Bank and Trust Company ("M&T"). Pursuant to the QTIP Trust, George F. Dixon III and Richard E. Dixon became co-trustees upon the death of George F. Dixon, Jr. 3. The Lottie Ivy Dixon Revocable Trust (hereinafter "Revocable Trust") was established pursuant to Agreement made and entered into August 19, 1985 by and between Lottie Ivy Dixon ("Settlor") and Dauphin Deposit Bank and Trust Company ("Trustee"). 4. The Revocable Trust was under the sole administration of the Corporate Trustee, Manufacturers and Traders Trust Company, Successor to Allfirst Trust Company of Pennsylvania, Successor to Dauphin Deposit Bank and Trust Company (hereinafter "Corporate Trustee" or "M&T") from August 19, 1985 to June 28, 2007 when George F. Dixon III and Richard E. Dixon became co-trustees at the time of the Settlor's Death. 5. M&T has been the Corporate Trustee for both the QTIP Trust and the Revocable Trust since their inception. 6. The Corporate Trustee had sole administration and control of the Revocable Trust for a total of almost 22 years or 262 months until the Settlor's death. 2 4735110 7. As of September 1993 and continuously thereafter through to the present, the Corporate Trustee in charge of administration of the Revocable Trust was in the person of Joseph A. Macri, Vice President and Trust Officer of M&T. Mr. Macri had sole charge of the Revocable Trust for almost 14 years (166 months). He was also the Trust Officer in charge of the QTIP Trust. 8. The Corporate Trustee had a Power of Attorney to be invoked at any time when the Settlor was deemed incapacitated. The Corporate Trustee invoked this Power of Attorney in May of 2005 and accepted the duties in June of 2005 until the Settlor's death. 9. Article II of the Revocable Trust instrument provided the following: "During the Settlor's lifetime, the Trustee shall have, hold, manage, invest and reinvest the Trust Assets, collect the income, and pay or apply the entire net income as the Settlor may from time to time direct in writing. The Trustee shall also pay to � the� Settlor such sums from or portions of the principal of the Trust as the Settlor may from time to time request in writing delivered to the Trustee during the Settlor's lifetime." 10. Upon the Settlor's death, the Revocable Trust provided that the Trustee shall pay over the net income in quarterly installments to the Settlor's children, per stirpes, for a period of ten years and upon the tenth anniversary of the Settlor's death distribute the principal and any undistributed income to the children then living, per stirpes. Accordingly, ' the four children, including Obj ectants, are current income beneficiaries and contingent remaindermen of the Revocable Trust. 11. Article VI of the QTIP Trust instrument directs that the QTIP Trust pay to Lottie Ivy Dixon net income or portions of principal only as "may be necessary for her maintenance and support and medical and nursing care, taking into consideration any other means readily available for such purposes." Because of the substantial assets and sustained retirement income provided directly to and/or for Mrs. Dixon's benefit, she generally had other means available to fund her maintenance and support. 3 4735110 Rather, the QTIP Trust was intended to fund the Revocable Trust. The Revocable Trust was to be used only in emergent situations and then only as directed by Lottie Dixon in writing. This "flow down" trust arrangement, that also included an Irrevocable Crummey Trust, was designed and established by Mr. and Mrs. Dixon to insure that the surviving spouse was taken care of and that the additional assets in both trusts would be maximized and protected for the benefit of the four children. It was intended that the bulk of the Revocable Trust would � remain intact and available to pay income for ten years after Lottie Dixon's death, and then principal, to the children. 12. It was well known, including to the Corporate Trustee, that Lottie Ivy Dixon was a modest and frugal woman with simple and basic living expenses. 13. Lottie Ivy Dixon had a regular monthly income from her husband's pension and Social Security of $8,874.00 per month or $106,488.00 per year. She therefore received a total of $1,473,084.00 in the 166 months that Mr. Macri solely administered the trust. In addition, the Settlor had a brokerage account that distributed $801,000.00 over the same period. In � additior�, the Settlor received regular distributions from the QTIP Trust. 14. During her lifetime, beginning October 1993, the Settlor received $1,882,174.01 in principal from the Revocable Trust (as stated in the Account at pages 29-36) and $929,323.73 in income from the Revocable � Trust (as stated at pages 103-114) for a total distribution to the income beneficiary of $2,811,497.74. The residual beneficiaries will receive no principal and $11,486.72 in income. 15. The Corporate Trustee paid federal and state income taxes that benefitted the Settlor in the sum of $926,431.00 directly from the Revocable Trust or the QTIP Trust. 16. The Corporate Trustee paid $156,600.00 to the LID Irrevocable Trust directly from the Revocable Trust or the QTIP Trust. 17. Lottie Ivy Dixon had a checking account with Dauphin Deposit which eventually became M&T Bank. She wrote checks numbered 12107 to 12161 and 16010 to 16014 in October, November and December of 1993 from distributions of the Revocable Trust. New checks were issued in 4 4735110 ` December of 1993 starting with number 101 written December 21, 1993. The account continued sequentially to check number 4946 on June 24, 2007. The total amount distributed out of that checking account was $4,080,094.00. There were no deposits from the brokerage account into the checl�ing account that could be determined. The brokerage account separately distributed $801,000.00. 18. In addition to the $1,473,084.00 in regular monthly income from the Carlisle pension and Social Security, the Settlor received $483,299.40 in income directly from the QTIP Trust and $1,504,230.00 in principal directly from the Revocable Trust and $167,700.00 in income directly : from the Revocable Trust. These deposits equaled $3,6�8,313.40 into the checking account. II. Obiections l. The Corporate Trustee failed to comply with the Trust instrument by failing to have, hold, manage, invest and re-invest the Trust assets, collect the income and pay or apply the entire net income ONLY as the � Settlor may, from time to time, direct in writin�. 2. The Corporate Trustee failed to comply with the Trust instrument by failing to pay to the Settlor such sums from or portions of the principal of the Trust ONLY as the Settlor may, from time to time, request in writin� delivered to the Trustee during the Settlor's lifetime. 3. The Corporate Trustee failed to comply with the Trust and abused its discretion by taking from principal, converting principal to income and taking income that had a restricted use as defined by the governing instrument for the exclusive use of the income beneficiary and the absolute disfavor of the remainder beneficiaries. The Corporate Trustee's administration of the Trust failed to implement the Rule that requires impartiality based on what is fair and reasonable to both income and remainder beneficiaries. 4. The Corporate Trustee failed to comply with the Trust and abused its discretion by distributing $1,882,174.01 in principal from the Revocable Trust (see Account, pp 29-36) without receiving written requests from the Settlor or taking into consideration other means of income. The 5 4735110 Corporate Trustee did not take into consideration the diminished income interest of the residual beneficiaries. The directions of the governing instrument to provide for the residual beneficiaries were not followed. . 5. Objection is made to the entries on pages 32-36 of the principal Account which simply list "Lottie I. Dixon— Distribution" with dates and amounts, totaling $1,504,230.00, with no documentation and with no explanation, information or stated purpose for the distributions. Rule 6.1(a) of the Pennsylvania Orphans' Court Rules provides, inter alia, that Accounts shall state the persons to whom disbursements and distributions are made and the pur�ose thereof. Rule 6.1 further requires that Accounts be prepared and filed in substantial conformity with the Uniform Fiduciary Accounting Principles and the model Account formats set forth in the Appendix to the Rules. The Fiduciary Accounting Principles in Section III provide, inter alia: "Transactions shall be described in sufficient detail to give interested parties notice of their purpose and effect." 6. The Corporate Trustee failed to comply with the Trust and abused its discretion by distributing $929,323.73 in income from the Revocable � Trust (see Account, pp 103-114) without receiving written direction from the Settlor or taking into consideration other means of income. The Corporate Trustee did not take into consideration the diminished income interest of the residual beneficiaries. The directions of the governing instrument to provide for the residual beneficiaries were not followed. 7. Objection is made to the entries on pages 112-114 of the income Account which simply list "Lottie I. Dixon— Distribution" with dates and amounts, totaling $167,700.00, with no documentation and with no explanation, information or stated purpose for the distributions in violation of Rule 6.1 of the Pennsylvania Orphans' Court Rules and the Uniform Fiduciary Accounting Principles. (See Objection 5 above). 8. The Corporate Trustee violated the Trust instrument and abused its discretion by converting $457,869.68 from principal to income (see Account, pp 21-28) which was not authorized by the governing instrument and which further diminished the income interest of the residual beneficiaries. 6 4735110 9. The Corporate Trustee failed to comply with the Trust and abused its discretion by making adjustments that diminished the income interest in the Trust that required all the net income be paid to the Settlor. The power to determine and adjust income and principal was not included in the governing instrument. The governing instrument instructed the Corporate Trustee to add income to principal as he deemed appropriate. 10. The Corporate Trustee abused its discretion by distributing income and principal from the Trust without taking into consideration any other means readily available for the maintenance and support of the Settlor. 1 l. The Corporate Trustee failed to comply with the Trust and abused its discretion by making adjustments that totally favored the income beneficiary when the directions of the governing instrument favored the residual beneficiaries including to provide net income to the residual beneficiaries for a period of ten years after the Settlor's death. 12. The Corporate Trustee abused its discretion to maintain Trust assets to be held, administered, distributed and governed by the Trustee, in Trust nevertheless, for the residual beneficiaries as required by the governing • instrument. The Corporate Trustee showed extreme partiality to the income beneficiary to the absolute disfavor of the residual beneficiaries. 13. The Corporate Trustee abused its discretion by not applying directly to the Settlor's benefit when it was apparent that the Settlor was unable to act to the Settlor's best interest or advantage as required by the governing instrument to the disadvantage of the residual beneficiaries. 14. The Corporate Trustee abused its discretion by depositing $483,299.40 into the LID checking account from the QTIP Trust without taking into account other means of income and the diminished income interest of the residual beneficiaries. In addition, there were no written requests for the transferred funds. There was no consideration of the restrictions, stated in the governing instrument, as to the use of the funds. 15. The Corporate Trustee abused its discretion in the administration of the QTIP Income Trust so that other means of income were not taken into consideration to the disadvantage of the Revocable Trust principal account. 7 4735110 16. The Corporate Trustee abused its discretion by delaying the production of the Trust accounting. 17. Objectants hereby reserve the right to amend these Objections following the conclusion of discovery related to the various undefined distributions of principal and income. 18. Obj ectants request that this Court: a. Direct that the Account be restated to conform to the Pennsylvania Orphans' Court Rules, including Rule 6.1, and the Uniform Fiduciary Accounting Principles as required by Rule 6.1(e) and (� of the Pennsylvania Orphans' Court Rules, and to correct those entries inappropriately listed. b. Direct the Corporate Trustee/Accountant and its counsel to provide such proper supporting documentation as may be requested and/or necessary, including written requests or written directions from the Settlor, to authorize and substantiate the items identified as improper distributions of principal and/or income. c. Surcharge the Corporate Trustee/Accountant for all improper and/or unauthorized distributions of principal and income to the Settlor andlor Settlor's behalf. d. Surcharge the Corporate Trustee/Accountant for all improper conversions of principal to income in the amount of$457,869.68. e. Award Objectants attorneys' fees and costs. f. To award such other and further relief as may be warranted under the circumstances. 8 4735110 Respectfully submitted, � , Date: July 26, 2013 Kevin J. ehner, Esq. (PA Bar No. 33539) OB ERMAYER REB MANN MAXWELL & HIPPEL LLP 200 Locust Street, Suite 400 Harrisburg, PA 17101 (717) 234-9730 (717) 234-9734 (Fax) Kevin.Kehner(�a,ober�nayer.com 9 4735110 ' � � l�E'V I�J I��-N C 1�, VERIFICATION I,GEORGE F.DIXON III,a Trustee and Beneficiary of the Trust and Objectant herein,hereby state that I have read the statements contained in the foregoing Objections to Account and the statement of fact contained therein and aver that they are true and correct to the best of my information,knowledge and belief. This statement is made subject to the penalties of 18 Pa.C.S.A.Section 4904 relating to unsworn falsification to authorities. �� Date: July 2-� ,2013 George F.Dixon III,Trustee, . . Beneficiary and Objectant : VERIFICATION I, RICHARD E. DIXON, a Trustee and Beneficiary of the Trust and Objectant herein,hereby state that I have read the statements contained in the foregoing Objections to Account and the statement of fact contained therein and aver that they are true and correct to the best of my information,knowledge and belief. This statement is made subject to the penalties of 18 Pa.C.S.A. Section 4904 relating to unsworn falsification to authorities. Date: July � , 2013 �-- � � Richard E. Dixon, Trustee, Beneficiary . . and Objectant . IN RE: : IN THE COURT OF COMMON PLEAS : OF CUMBERLAND COUNTY, ESTATE OF LOTTIE IVY DIXON : PENNSYLVA1vIA : ORPHANS' COURT DIVISION : NO. 21-07-0686 IN RE: : IN THE COURT OF COMMON PLEAS : OF CUMBERLAND COUNTY, ESTATE OF GEORGE F. DIXON, JR. : PENNSYLVANIA Deceased : : ORPHANS' COURT DIVISION : NO. 21-1994-0754 CERTIFICATE OF SERVICE I hereby certify that notice of the filing of the foregoing Objections to Account � with a copy of the Objections has been provided by�letter, sent by first class mail, dated July 26, 2013 to counsel of record for the Accountant, counsel of record for Marshall Dixon, and to Charlotte Dixon, at the following addresses: Elizabeth P. Mullaugh, Esquire Daniel L. Sullivan, Esquire Kimberly M. Colonna, Esquire SAIDIS, SULLIVAN&ROGERS McNEES, WALLACE &NURICK 26 West High Street 100 Pine Street Carlisle, PA 17013 P.O. Box 1166 Harrisburg, PA 17108-1166 Mark D. Bradshaw, Esquire Charlotte Dixon STEVENS &LEE 323 Bayview Street Harrisburg Market Square Camden, ME 0484353 17 North Second Street, 16th Floor Harrisburg, PA 17101 4735283 ..�_ ni��i��..-. i • * t Date: July 26, 2013 Kevin J. �e er, Esquire(PA ID Na. 335�9) OBERMAYER REBMAT�N MAXWELL &HIPPEL LLP 20� Locust Street, Sui#e 400 Harrisburg, PA 171{?1 (717) 234-9730 4735283