GUARDIANSHIP AND CONSERVATORSHIP OF MARY D. NOVOTNY, ALSO KNOWN AS MARY NOVOTNY, a Protected Person
CONSIDERED ON BRIEFS ON OCTOBER 2, 2017
FROM THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT TRIPP
COUNTY, SOUTH DAKOTA THE HONORABLE JOHN L. BROWN Judge
M. FITZGERALD KELLY M. PETERSON of Fitzgerald Law Firm Rapid
City, South Dakota Attorneys for Appellant Catherine Novotny.
A. SCHREIBER The Schreiber Law Firm Pierre, South Dakota
Attorney for appellees Paul Novotny Jr. and Mark Novotny.
WILBUR, RETIRED JUSTICE
The sole beneficiary of an irrevocable trust petitioned the
circuit court to terminate the trust and distribute the trust
property to her. After a hearing on the beneficiary's
motion for summary judgment, the circuit court refused to
terminate the trust and entered summary judgment in favor of
the trustees. The beneficiary appeals. We reverse and remand.
Mary Novotny and Paul Novotny Sr. had six children:
Catherine, Teresa, Mark, Paul Jr., Bruce, and Marianne. In
2007, Mary executed her last will and testament devising her
estate in equal shares to her six children as well as shares
to her grandchildren. In 2012, Mary was found to be a person
in need of protection. Paul Sr. had passed away. On July 12,
2012, a circuit court appointed Teresa, Paul Jr., and Mark as
Mary's co-guardians and co-conservators.
Mary's estate was worth approximately $2, 000, 000. Gary
Fenenga, a certified public accountant, had been Mary's
accountant. After Mary was found to be a person in need of
protection, Fenenga became the accountant for Mary's
co-conservators and co-guardians. He recommended that Teresa,
Paul Jr., and Mark reduce Mary's estate to avoid negative
tax consequences. In particular, he advised them to
distribute monetary gifts to Mary's children and
grandchildren to reduce the estate to $1, 000, 000. Between
July and December 2012, Teresa, Paul Jr., and Mark gifted a
total of $1, 270, 388.80 equally among the six Novotny
children. Each child received $196, 564.80. Mary's
grandchildren received less substantial monetary gifts.
Although five of the six Novotny children personally
received their gifts, Teresa, Paul Jr., and Mark could not
locate Catherine. They claimed that Catherine had not been in
contact with any Novotny sibling or Mary for some time. They
decided to preserve Catherine's share by creating an
irrevocable trust and placing Catherine's share of the
substantial gifting in the trust. They created the trust in
December 2012, and appointed themselves as trustees.
In January 2013, Teresa, Paul Jr., and Mark, in their
capacities as Mary's co-guardians and co-conservators of
Mary's estate, petitioned the circuit court for an order
retroactively approving their estate plan and the previously
distributed gifts, including the creation of the trust
holding Catherine's gift. We note that SDCL 29A-5-420
provides that "[u]pon petition therefor, the court may
authorize a conservator to exercise any of the powers over
the estate or financial affairs of a protected person which
the protected person could have exercised if present and not
under conservatorship, including the powers: (1) To make
gifts to charity or other donees, and to convey interests in
any property" and (3) To create irrevocable trusts. In
the petition, Teresa, Paul Jr., and Mark informed the court
that due to the lowering of the Federal Estate Tax credit,
the purpose of the estate plan and previous gifting was to
lower Mary's assets below $1, 000, 000. They further
claimed "[t]hat all gifting was done in such a manner as
to treat all heirs substantially equally." In regard to
Catherine's gift, the petition identified "[t]hat
the protected person has established an irrevocable
trust" for Catherine "in the event she can be
located." The trust would terminate at the end of ten
years if Catherine could not be located. The trustees
requested that the court appoint a guardian ad litem to
protect Catherine's interest.
At the hearing on the petition, the attorney for Mary's
We do have one unique situation in this case, your Honor. We
have six children, but we have one child that we cannot
locate. So, what we've done, to protect that
individual's interest, is we have set up a trust for her.
The conservators have set up a - -the co-conservators and
co-guardians - - have set up a trust for her out of their
Mom's estate, and she has been treated basically equally
with all the rest of the heirs. So, her share has gone in to
this trust. We haven't been able to locate her. We've
actually hired - - we've actually gone so far as to hire
a private investigator. He's searched, and he's been
unable to locate her. So, we haven't been able to locate
her. The trust we set up is a trust for her, and she is
entitled to the same assets as the other heirs, if she can be
located within the next ten years. If she cannot be located
within the next ten years, then the trust will lapse. At that
time, she would be over 70, so ten years, we thought, is a
long enough time to take care of that.
conclusion of the hearing, the court approved the petition.
The court appointed Fenenga as ...