State Street Bank and Trust Co. v. Reiser Case Brief Summary | Law Case Explained

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State Street Bank and Trust Co. v. Reiser | 389 N.E.2d 768 (1979)

A revocable trust is a will substitute that allows a person to transfer his or her assets outside of the probate system during life while also retaining the right of revocation and amendment. In addition, in some states, when the settlor of a revocable trust dies, the settlor’s creditors can’t access assets that have been placed in the trust, absent the settlor’s intent to defraud. In the 1979 case State Street Bank and Trust Company versus Reiser, the Appeals Court of Massachusetts considered whether a creditor could reach the assets of a settlor’s revocable trust after his death.

In September 1971, Wilfred Dunnebier executed a revocable trust where he retained the right to revoke or amend the trust and the right to direct the disposition of trust assets. Also, under the trust, the trustee of the trust was given the discretion to pay all debts and expenses arising out of the administration of Dunnebier’s estate from trust assets in the event of Dunnebier’s death.

Dunnebier conveyed the capital stock of five closely held corporations that were involved in building single-family home subdivisions to the trust. Further, immediately following execution of the trust, Dunnebier executed a will in which he left his residuary estate to the trust.

About thirteen months later, Dunnebier applied to the State Street Bank and Trust Company for a $75,000 loan. In the application for the loan, Dunnebier included the income and assets of the five closely held corporations that he conveyed to the trust. Based on the application, the bank issued Dunnebier an unsecured loan for $75,000 and Dunnebier signed a personal guarantee.

Approximately four months later, Dunnebier died. At the time of his death, Dunnebier’s estate didn’t have sufficient funds to pay the bank the outstanding balance on the $75,000 loan.

Subsequently, the bank brought an action against Murray Reiser, as trustee of Dunnebier’s trust, in Massachusetts probate court, seeking payment of the debt. Specifically, the bank argued that the trust was part of Dunnebier’s estate plan and that Dunnebier intended for the trust to pay for his debts. The probate court found that Dunnebier didn’t intend to defraud the bank and that the bank couldn’t reach the trusts’ assets. The bank appealed to the Appeals Court of Massachusetts.

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