Delaware Supreme Court Partially Reverses Chancery Ruling on Estate Administration and Priority

Frederick Conaway v. Baird, et al. File No. 359, 2016 (March 28, 2017)  

       Jesse Frederick Conaway (“Jesse) was the decedent’s adult son, and Janice Russell-Conaway (“Janice”) was the decedent’s second wife and widow. After disputes arose, the Court of Chancery removed them and named Kevin Baird as administrator and trustee. Mr. Baird then petitioned the Court of Chancery to ascertain whether certain transactions in Jesse and Janice engaged were proper.

       Eventually the case was appealed up to the Delaware Supreme Court. The Delaware Supreme Court partially reversed the trial court and ruled on several issues. Perhaps most notable among them is that the Supreme Court found that the trial court erred in merging the administration of the decedent’s trust and his estate. The Supreme Court found that the trial court incorrectly read the holding in In Re Estate of Arcaro, 1977 WL 9539 (Del. Ch. Oct. 12, 1977) to allow for the reordering of priority for the payment of estate debts and honoring bequests. In short, the Supreme Court held that the proper order would have seen the debts paid first by any estate assets before using any trust funds to pay those debts. As such, Jesse and Janice had been wrong to use trust assets to pay certain estate debts so that they could withdraw their bequests from the estate.