In re Green

Hal Price Headley, Sr., created trusts containing 886 acres of property in Kentucky, among other assets. Hal’s wife, Mrs. Headley, was the lifetime beneficiary of the trust, and on her death, an equal share was to be held for each of the Headleys’ three children, including Patricia Headley Green. The three children were each given a special testamentary power of appointment. Each child had the power to distribute the trust among the child’s surviving issue. If the child did not exercise the power, then the child’s trust would be distributed among the child’s own children. Patricia had five children, including Jonathan Green. After Hal died in 1959, the family disagreed about how to divide the 886 acres, and Mrs. Headley, Patricia and her siblings, and Patricia’s children eventually entered into agreements (the Fayette agreements). Under the Fayette agreements, the 886 acres were partitioned into three parts, one for each of Hal’s children. Patricia was required to exercise her power of appointment in favor of her five children. Accordingly, Patricia executed a will leaving one-fifth of her portion of the 886 acres to Jonathan. In 1986 Jonathan became insolvent. In January 1986, Patricia made a new will revoking her old will. Patricia’s new will would not give one-fifth of the land to Jonathan but instead would make Jonathan trustee for his children. Jonathan filed a petition for bankruptcy in September 1986. Because Patricia’s new will was executed while Jonathan was insolvent and within one year of the filing of Jonathan’s petition for bankruptcy, the trustee moved to set aside the new will as a fraudulent conveyance. Patricia moved for summary judgment, arguing that the Fayette agreements were void because they violated Hal’s intent that Patricia’s power of appointment be testamentary, meaning Patricia could not contract away her power of appointment and Jonathan never had an interest in the land. The bankruptcy court granted Patricia’s motion, and the district court affirmed. The trustee appealed.