Can the Family Court “break” a trust if there are allegations that it is illusory ?
Recently there was a claim made in the Charleston Family Court that an overseas trust was fraudulent and being used to hide marital assets. From what I have heard, these allegations were made in good faith and were support by credible evidence. At the beginning of the first day of the trial (scheduled for 3 weeks), the trial judge ruled that the Family Court had no jurisdiction over the Trust and dismissed the case!
Was he correct? Likely so, but I’d love to hear your thoughts!
The SC Probate Code states that:
“(T)he probate court has exclusive original jurisdiction over all subject matter related to: ….(3) trusts, inter vivos or testamentary, including the appointment of successor trustees;” S.C. Code § 62-1-302.
The Probate Code further grants concurrent jurisdiction to the Family Courts
“(T)o hear and determine issues relating to … (the) interpretation of marital agreements in connection with estate, trust, guardianship, and conservatorship actions pending before it, concurrent with that of the family court pursuant to Section” S.C. Code § 62-1-302 (Emphasis added)
The SC Code of Laws grants the Family Court concurrent jurisdiction with Probate Court that is limited
“… only to matters dealing with the estate, trust, and guardianship and conservatorship actions before the probate court.” S.C. Code § 63-3-530 (Emphasis added).
So it seems very clear.
The only way the Family Court can have jurisdiction over matters dealing with a trust issue is if the trust issue is pending before both the probate and family courts at the same time. In the case to which I referred at the beginning of this blog, no claim had been made against the overseas trust, so the family court in Charleston had no concurrent jurisdiction to make a ruling regarding the “illusory” nature of the trust.
In my opinion, the Charleston family court judge was correct, but since I have also learned that no appeal has been requested, Supremes won’t be weighing in on this one!
Let me know your thoughts!
Guy Vitetta, Charleston
March 31, 2022