Trust Beneficiary Lacks Standing to Sue for Breach of Contract Calling for Trust to be Funded

Superior Court Case Underscores the Importance of Planning for Long Term Care

Exemption Automatically Applied to GST Trust

Students Not “Away From Home” In Order to Deduct Expenses


On April 20, 2017, the Supreme Court issued a decision in Glassie v. Doucette, No. 2014-108-Appeal (R.I. 2017), holding that a Trust beneficiary lacked standing to sue as a third party intended beneficiary of a contract which called for the creation and funding of the Trust.

During divorce proceedings, Donelson and Marcia, husband and wife, entered into a property settlement agreement under which Donelson agreed to create a trust for their minor child, Jacquelin and to fund the Trust with $10,000 per year until it contained a principal amount equivalent to Trusts that were previously created for her older sisters, Alison and Georgia. One month later, Donelson established the Trust. However, the Trust did not contain language that it was created pursuant to the property settlement agreement, or that he was required to fund the Trust with the sum of $10,000 per year until the value equaled the value of the Trusts for Alison and Georgia.

Donelson died on February 3, 2011, having contributed $123,336.82 to the Trust – an amount which did not equal the value of Jacquelin’s sisters’ trusts. Jacquelin filed a claim against her father’s estate which was denied. On a petition for determination of the disallowed claim, the Probate Court ruled that the claim should be decided by the Superior Court. Thereafter Jacquelin filed a Superior Court action alleging that Donelson had breached the property settlement agreement. About five months later, Jacquelin died unexpectedly and the Executrix of her estate was substituted as plaintiff.

Defendant moved for summary judgment on grounds of standing, arguing that only the trustee has the capacity to file suit on behalf of the beneficiaries of a trust, and the claim was not cognizable since the Trust terminated upon Jacquelin’s death. The Executrix responded that she was not suing on behalf of the Trust, but as the intended third party beneficiary to the property settlement agreement. The Superior Court granted defendant’s motion for summary judgment and the Executrix appealed.

On appeal, the Rhode Island Supreme Court wrote that “[A]lthough the beneficiary of such a trust is the beneficiary of the promise [under the contract], his rights must be enforced in accordance with the law of [t]rusts.” Finding it undisputed that Donelson created a Trust pursuant to the property settlement agreement, the Court turned to Plaintiff’s claim that it was not properly funded in breach of the contract and held that the provision requiring Donelson to fund the Trust “relates to Jacquelin’s status as a beneficiary of the Trust and not as a third-party beneficiary of the property settlement agreement.” Under the law of trusts, trust beneficiaries may only maintain proceedings in limited circumstances such as where the beneficiary is entitled to an immediate distribution or the trustee is unable, unavailable, unsuitable, or improperly failing to protect the beneficiary’s interest. Thus, neither Jacquelin nor the Executrix of her Estate, as Trust beneficiary, could maintain an action as a third party beneficiary of the property settlement agreement.

For more information, please contact our trust and estate attorneys, Bernard A. Jackvony, Gene M. Carlino and Rebecca M. Murphy at 401-824-5100 or email, and

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In Manchunis v. R.I. Dept. of Human Services, C.A. No. PC 2016-0613 (R.I. Super. Ct. 2017), the Rhode Island Superior Court affirmed the decision, denying an applicant’s application for Long Term Care Medical Assistance because she was the beneficiary of a Medicaid Qualifying Trust established before August 11, 1993.

Mrs. Machunis applied for Long Term Care in December of 2014. The application documented that she was the beneficiary of a Trust executed on August 29, 1991 which held certain assets, including bank accounts, totaling $78,149.57. The Trust authorizes the Trustee to pay for Mrs. Machunis’ needs and expenses during her lifetime, as well as payments for her care, support and education. Upon Mrs. Machunis’ death, the Trustee would pay her estate expenses and make three equal payments of $5,000 to each of Machunis’ three grandchildren.

In September, 2015, DHS sent a notice denying Mrs. Machunis’ application, as her resources were in excess of the limit of $4,000. Mrs. Machunis requested a hearing at which she presented testimony and gave evidence. The hearing officer denied Mrs. Machunis’ request for relief, concluding that DHS was correct in determining that Mrs. Machunis’ assets were above the resource level for Medical Assistance. In so ruling, the hearing officer determined that the Executive Office of Health and Human Services Medicaid Code of Administrative Rules (MCAR) supported the proposition that a trust established prior to August 11, 1993 is considered a Medicaid Qualifying Trust, may be irrevocable or revocable, and does not have use limitations on the funds. Considering MCAR 0382.50.05, the hearing officer found that the “maximum amount which the Trustee may distribute from a Medicaid Qualifying Trust is to be counted as an available resource. The maximum amount is the amount the Trustee could disburse if the Trustee exercised his or her full discretion under the terms of the Trust.” The hearing officer found that the Trust at issue does not prevent the Trustee from giving money to Mrs. Machunis for her benefit.

Mrs. Machunis appealed. On appeal the Superior Court provided DHS with great deference, and agreed that under MCAR 0382.50.05 and 0382.50.05.05, it is irrelevant whether a Medicaid Qualifying Trust is a revocable or irrevocable trust. Rather, the determining factor is the amount available for distribution to the beneficiary. Any payments made from the trust income or principal, as well as distributions that a trustee could make under the Trust are countable. Thus, the Court held, “assets in a Medicaid Qualifying Trust that are available can be treated as countable resources when determining eligibility for Medical Assistance.”

The Manchunis decision underscores the need to revisit your estate plan on a regular basis. As we age our needs change. Planning for our own long term care may not have been a primary concern when our estate plan was drafted several years earlier. It is important to have your estate plan reviewed by an attorney to ensure that long term care needs are considered and addressed.

For more information, please contact our trust and estate attorneys, Bernard A. Jackvony, Gene M. Carlino and Rebecca M. Murphy at 401-824-5100 or email, and

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The IRS ruled in IRS Letter Ruling 201714008, ¶35,390 that a trust was deemed a generation skipping transfer (GST) trust, and the GST tax exemption was automatically allocated to the transfer where there were no mandatory distributions to non-skip persons. The trust at issue was established for the benefit of the donor’s brother, the brother’s spouse, and his issue. It gave the brother a lifetime and testamentary limited power to appoint the assets of the Trust to his spouse and issue (subject to an ascertainable standard), as well as to any charitable organization. The brother also had a power of withdrawal that could not exceed 1) the total amount of contributions for that year; 2) an amount equal to the gift tax annual exclusion amount; or 3) the greater of $5,000 or 5% of the trust value.

There was no provision in the trust for mandatory distribution to non-skip beneficiaries (the donor’s brother, spouse and children). The power of appointment granted to the donor was limited, and the withdrawal right did not make the amount subject to the right includable in the gross estate of a non-skip person. Accordingly, none of the exceptions to the definition of a GST Trust were applicable. Thus, the donor’s available GST exemption was automatically applied to the transfer.

For more information, please contact our trust and estate attorneys, Bernard A. Jackvony, Gene M. Carlino and Rebecca M. Murphy at 401-824-5100 or email, and

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The Tax Court recently held that nonresident foreign students who came to the United States to work for a summer before returning home, under the U.S. State Department’s Summer Work Travel Program (Travel Program), were not entitled to deduct as unreimbursed employee expenses amounts paid in connection with their participation in the Travel Program because they were not “away from home” in pursuit of a trade or business.

The Tax Court found that two of the taxpayers had no business connections with their home countries and the third had ended his employment before arriving in the U.S. and did not resume it on his return. Thus, since the taxpayers did not have any business connections with their home countries, they were not “away from home” during the tax year. Important for the Court was the absence of a requirement that a Travel Program student maintain another residence in his home country, as well as a lack of evidence to corroborate any such requirement imposed upon them by sponsors or employers. There was no business reason that required the students to maintain their usual residence, so the mere fact that they were in the U.S. for temporary employment did not supply a compelling business reason for continuing to maintain the foreign residence. Moreover, though the Travel Program required the students to maintain health insurance, the Court found that insuring against the costs of maintaining a taxpayer’s health is primarily a personal concern, not merely a business concern and that the expense of such insurance is deductible only under Code Sec. 213.

For more information, please contact our trust and estate attorneys, Bernard A. Jackvony, Gene M. Carlino and Rebecca M. Murphy at 401-824-5100 or email, and

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