In the Matter of the Estate of K. WENDELL REUGH
principal question in this appeal is whether the superior
court committed error when removing appellants JoLynn
Reugh-Kovalsky and Steve Gill as co-personal representatives
of the estate of K. Wendell Reugh and as co-trustees of the
Reugh revocable living trust. Nevertheless, the expanse of
this opinion covers mainly the topics of subject matter
jurisdiction and waiver by failure to assert an argument in
the trial court. We uphold the trial court's removal of
the co-personal representatives and co-trustees and the
appointment of a successor personal representative and
introduce the parties. This complicated appeal concerns the
estate of K. Wendell Reugh, who died in March 2015, at the
age of 86. Wendell Reugh's wife, Mary Ann Reugh, died in
1996. Wendell and Mary Ann Reugh's three children, JoLynn
Reugh-Kovalsky, Mark Reugh, and James Reugh, initiated this
appeal. We refer to the three collectively as "the
former co-personal representatives of Wendell Reugh's
estate and former trustees of the K. Wendell Reugh revocable
living trust (the Reugh trust), the daughter JoLynn
Reugh-Kovalsky and Steve Gill, also appea trial court
rulings. Gill is a long-time business associate of Wendell
Reugh. We refer to the two alternatively as
"Reugh-Kovalsky and Gill," "co-personal
representatives," "personal representatives,"
and "co-trustees." Notice that we refer to JoLynn
Reugh-Kovalsky differently depending on her role as a child
or as a co-personal representative or co-trustee. The two
respondents are Inland Northwest Community Foundation
(Community Foundation), the purported residual beneficiary of
the Reugh revocable living trust, and Northwest Trustee &
Management Services (Northwest Trustee), the successor
personal representative of the estate of K. Wendell Reugh and
successor trustee of the Reugh trust.
background. On January 4, 2011, K. Wendell Reugh, a
successful Spokane businessman, executed a will and a
revocable living trust. The will identified as heirs
Reugh's three children, James Reugh, Mark Reugh, and
JoLynn Reugh-Kovalsky and Reugh's close companion, Doreen
Decker. The will bequeathed tangible personal property such
as jewelry, household furniture, books, paintings, and
automobiles to Reugh's heirs. The will then directed that
the residuary estate pass to the "K. Wendell Reugh
Revocable Living Trust" to be distributed in accordance
with a separate trust agreement. Clerk's Papers (CP) at
337 (some capitalization omitted).
Wendell Reugh's January 2011 will named Dominic Zamora
and James Simmons as personal representatives of the estate.
Portions of Article IV of the will further read:
2. In the event either of said co-Personal Representatives is
or becomes unwilling or unable to serve, then the other shall
serve as co-Personal Representative and shall nominate three
individuals to serve as co-Personal Representatives with him.
My children shall, by majority vote, designate one of said
nominees to serve as the other co-Personal Representative.
B. My estate shall be administered by my Personal
Representative named in this Will without the intervention of
any court and with all powers granted herein and by law to a
Personal Representative acting with nonintervention powers.
I direct that such nonintervention powers be
unrestricted and that they may be exercised whether or
not necessary for the administration of my estate. My
Personal Representative shall act with full power to:
. . . .
2. Select any part of my estate in satisfaction of any
partition or distribution hereunder, in kind, in money, or
both (including the satisfaction of any pecuniary bequest),
in shares which may be composed differently, and to do so
without regard to the income tax basis of specific property
allocated to any beneficiary (including any trust).
. . . .
D. Except to the extent fundamentally inconsistent with the
provisions of this Will and of my estate plan, I hereby
authorize my Personal Representative to disclaim, in whole or
in part, any devise or legacy or any interest in any trust
provided for my benefit under the Will of any person or under
any trust instrument at any time within nine (9) months after
the date of the transfer which created an interest in me.
CP at 337-38 (emphasis added).
on January 4, 2011, K. Wendell Reugh signed a revocable
living trust agreement. The trust agreement also identified
K. Wendell Reugh's three children. The trust instrument
listed Wendell Reugh as both settlor and initial trustee of
the trust. The document read that "[t]he Settlor hereby
transfers to the Trustee the sum of One Hundred Dollars
($100.00)." CP at 342. Reugh, however, never transferred
the $100 or any other property into the trust, at least
during his lifetime. On Reugh's death, the trust,
according to the terms of the trust agreement, would convert
to an irrevocable trust. The trust instrument directed the
trust to pay funeral expenses, costs of administration,
estate taxes and other taxes resulting from Reugh's death
and any debts owed by Reugh from the trust estate before any
distribution to the residuary beneficiary.
revocable living trust instrument listed gifts to be paid
before any distribution of the trust assets to the residual
beneficiary. The gifts included $250, 000 to Wendell
Reugh's sister, $20, 000 to Reugh's niece, $20, 000
each to two nephews, $10, 000 to the Spokane Shriner's
Hospital for Crippled Children, $25, 000 to Spokane's
United Central Methodist Church, $50, 000 to Reugh's
former daughter-in-law unless she had remarried, and $1.5
million to each of Reugh's three children. The Trust also
directed that $1 million be transferred to a charitable
remainder trust for the benefit of Doreen Decker.
Wendell Reugh's Trust instrument anticipated that Wendell
Reugh would establish a charitable foundation or a charitable
donor-advised fund before his death. The revocable living
trust agreement directed that the residuary of the trust
estate, after payment of gifts, pass to either Reugh's
charitable foundation, the donor-advised fund, or both if
Reugh had created both. The trust instrument read:
2. If Settlor established neither a charitable foundation nor
a charitable donor advised fund, said remainder shall be
distributed to the Inland Northwest Community Foundation, to
be held as an endowed donor-advised fund known as the Wendell
and MaryAnn Reugh Family Fund. Such fund shall have
Settlor's three children as its initial advisors. Upon
the death, disability or resignation of any such advisors, a
replacement shall be appointed by the Board of Directors of
the Inland Northwest Community Foundation from among the
descendants (including descendants by adoption) of the
Settlor. Settlor wishes that charitable distributions be
made from the fund primarily to the kinds of charitable
organizations Settlor has given to during his lifetime,
serving the people of the Inland Northwest.
CP at 347-48 (emphasis added).
to the will's identification of personal representatives
for the estate of K. Wendell Reugh, Wendell Reugh named
Dominic Zamora and James Simmons to serve as co-trustees
"of this Trust and of any testamentary trusts
established by the terms of this Trust." CP at 349. If
the trustees were unable or did not wish to serve, the Trust
provided for the selection of successor trustees through the
same process that the will established for appointment of
successor personal representatives, by which process the
children would, by majority vote, choose among nominees.
Wendell Reugh died on March 22, 2015. Dominic Zamora and
James Simmons thereafter declined their appointments as
co-personal representatives of the estate of K. Wendell Reugh
and co-trustees of the Reugh trust. On March 27, 2015,
pursuant to Wendell Reugh's will and the revocable living
trust instrument, the children of Reugh appointed JoLynn
Reugh-Kovalsky and Steve Gill as successor co-personal
representatives and co-trustees.
March 27, 2015, co-personal representatives JoLynn
Reugh-Kovalsky and Steve Gill petitioned, under Spokane
County Superior Court cause no. 15-4-00471-1, for probate of
the will and the grant of nonintervention powers afforded in
the will. The trial court entered an order admitting the will
to probate, declared the estate solvent, and granted
nonintervention powers to the co-personal representatives.
estate of K. Wendell Reugh's administration has been
complex due to Reugh's high net worth. The co-personal
representatives toiled for two and one-half years to value
the estate and to file an estate tax return. Beginning in
2016, the Internal Revenue Service fastidiously examined
Reugh-Kovalsky and Steve Gill, as co-trustees of the
revocable living trust, distributed to each beneficiary named
in the trust the gift listed, including $1.5 million to each
of Wendell Reugh's children. The distributions totaled
nearly $5 million. Oddly, despite the distributions in
accordance with the trust agreement, Reugh-Kovalsky and Gill
contend they never administered the trust, but only
administered the estate. They claim the trust never held any
assets to administer.
29, 2015, an attorney for the co-personal representatives and
co-trustees wrote to the Community Foundation:
Please be advised that Inland Northwest Community Foundation
has been named in the K. Wendell Reugh Revocable Living Trust
to receive residue funds. The amount of the funds to be
distributed to Inland Northwest Community Foundation is
unascertainable at this time. It will be quite some time
before an appraisal of the estate assets is completed.
The funds are to be held as an endowed donor-advised fund,
known as the Wendell and Mary Ann Reugh Family Fund. Such
funds shall have the three Reugh children as its initial
As soon as it can be ascertained as to the amount of funds
involved, I will notify you in behalf of the trust.
CP at 612.
three children of Wendell Reugh and representatives from the
Community Foundation planned to meet on December 4, 2015. The
parties later canceled the meeting with the intention of
resetting the meeting after the co-personal representatives
filed the federal estate tax return.
Reugh-Kovalsky and Steve Gill met with Thomas Culbertson, the
estate of K. Wendell Reugh's attorney, in late December
2015. Reugh-Kovalsky and Gill mentioned during the meeting
that Reugh, preceding his death, uttered comments about his
wishes, which comments conflicted with the revocable living
trust language. The attorney responded that the law would not
assign any weight to the comments, but that the trust
language controlled disposition of the estate. On January 8,
2016, the attorney wrote a letter to Reugh-Kovalsky and Gill,
which read in part:
JoLynn, you have an obvious conflict of interest since on the
one hand you are one of the specific beneficiaries and on the
other hand you are a fiduciary as co-personal representative
of Wendell's estate and co-successor trustee of his
living trust. Conflicts of interest are common and
permissible in the context of trusts and estates; it is not
the conflict itself which gets people into trouble, but what
they do in light of the conflict.
As fiduciaries, there are a number of duties and
responsibilities which you owe to all the beneficiaries, but
there are two duties which are paramount. First, you have a
duty of impartiality to the beneficiaries; that is, you
cannot favor the interests of any beneficiary or group of
beneficiaries over the interests of another beneficiary.
Second, you have a duty of full disclosure; that is, a duty
to keep all the beneficiaries sufficiently informed that they
are in a position to protect their best interests. In short,
you cannot (consistent with your fiduciary duties) treat the
Community Foundation as an adversary, as you might if you had
a dispute with another party as to which you owe no fiduciary
CP at 185-86 (emphasis omitted). We do not know how this
confidential letter, covered by the attorney-client
privilege, became part of the court record.
January 26, 2016, Dominic Zamora, accountant for the estate
of Wendell Reugh, sent a letter to the Inland Northwest
Community Foundation's counsel, which letter read, in
Our firm has been retained to prepare the associated state
and federal estate tax returns for the Estate of K. Wendell
Reugh. Mr. Reugh passed away on March 22nd, 2015. The
personal representatives of the estate, Mrs. Jolynn
Reugh-Kovalsky and Mr. Steve Gill, have asked me to prepare
this letter as it relates to a charitable contribution to the
Inland Northwest Community Foundation.
Mr. Reugh's will contains a charitable disposition. As
such, we are prepared to transfer approximately $2.2 million
to the Inland Northwest Foundation. The charitable
contribution would consist of an IRA in the name of Mr. Reugh
with an approximate fair market value of $1.5 million and
approximately $720, 000, which is the current actuarial value
of the remainder interest in a charitable remainder unitrust
created in Mr. Reugh's will. The transfers would be
completed with a combination of cash and publicly traded
securities by the end of the first quarter of 2016.
We ask that you talk with your client for the purposes of
considering our proposal. If the Foundation finds this
proposal suitable, we will have the necessary documents drawn
up and complete the process of the transfer.
CP at 585. The letter did not disclose that the Community
Foundation might receive $15 million through the trust. The
Community Foundation rejected the co-trustees' offer.
2016, JoLynn Reugh-Kovalsky and Steve Gill, as executors of
Wendell Reugh's estate filed a federal estate tax return.
The return confirmed that the Inland Northwest Community
Foundation, a charity, would receive the remaining residue of
Wendell Reugh's wealth, estimated at $15 million. Despite
Reugh-Kovalsky and Gill claiming to have never activated the
Reugh trust, the two identify themselves in the estate return
as co-trustees. JoLynn Reugh-Kovalsky and Steve Gill never
informed the Community Foundation of entries in the estate
7, 2016, counsel for the Community Foundation received a
letter from an attorney for Mark and Jim Reugh. The letter
reads, in part:
. . . Jim and Mark hired us to ensure their late father's
charitable objectives are carried out through the large
charitable distribution in the Trust.
Mr. Reugh was a charitable man who wanted his charitable
legacy continued by his children, his grandchildren, his
great grandchildren, and to continue for a long time
thereafter. Mr. Reugh openly discussed with his children, and
his advisors, his desire to set up a private family
foundation (hereinafter, "Reugh Family Foundation")
to meet his charitable objectives. This discussion carried
over to Mr. Tom Culbertson, who prepared the Trust and Mr.
Reugh's Will. Mr. Culbertson drafted the Trust in
anticipation that he would set up the Reugh Family Foundation
for Mr. Reugh. For reasons unknown to Jim and Mark, Mr.
Culbertson failed to set up the Reugh Family Foundation and
failed to carry out Mr. Reugh's charitable objectives.
The Reugh Family Foundation is critically important to Jim
and Mark for two primary reasons. First, Jim and Mark desire
to benefit charities that were important to their father
during his lifetime. Most of these charities are outside the
reach, and are not permissible donees, of the Inland
Northwest Community Foundation. For example, charities to
which Mr. Reugh contributed during his lifetime that would
likely be donees of the Reugh Family Foundation include: (1)
St. Jude Children's Research Hospital; (2) Pulmonary
Fibrosis Foundation; (3) Foundation for Sarcoidosis Research;
(4) American Macular Degeneration Foundation; (5) The Brain
Aneurysm Foundation; (6) National Boy Scouts of America
Foundation; (7) PATH; (8) Stand up for Kids; (9) Angel View;
(10) Cure Alzheimer's Fund; (11) Literacy; and (12) Room
The second reason the Reugh Family Foundation is critically
important to Jim and Mark is to continue their father's
charitable ethic and instill this in their children (Mr.
Reugh's grandchildren) and their grandchildren (Mr.
Reugh's great grandchildren). Jim and Mark recognize and
admire the great work the Inland Northwest Community
Foundation does in Eastern Washington and Northern Idaho.
However, the legal control that would be exercised by Inland
Northwest Community Foundation over the charitable funds
received from the Trust and the ultimate decision of what
organizations would receive distributions from these
charitable funds is contrary to Mr. Reugh's charitable
We acknowledge that Mr. Culbertson, in drafting the Trust,
inserted the Inland Northwest Community Foundation as the
"backup" recipient of Trust's residuary assets.
We also acknowledge that Mr. Culbertson, in failing to
establish the Reugh Family Foundation during Mr. Reugh's
life, knew these funds would likely end up being distributed
to the Inland Northwest Community Foundation under the terms
of the Trust he drafted.
. . . .
Instead of engaging in expensive litigation to change the
charitable beneficiary of the Trust, involving extensive fact
finding into why Mr. Culbertson behaved the way he did, Jim
and Mark desire to reach a compromise with the Inland
Northwest Community Foundation to ensure their father's
charitable legacy continues to benefit the charities
important to their father. Consequently, Jim and Mark propose
a binding Trust and Estate Dispute Resolution Act (TEDRA)
Agreement, subject to approval by JoLynn Reugh-Kovalsky (as
beneficiary and Co-Trustee), Steve Gill (as Co-Trustee), and
the Washington Attorney General (as a necessary party under
RCW 11.110.120). We anticipate that a settlement,
memorialized by a binding TEDRA Agreement, would provide for
an immediate distribution to the Inland Northwest Community
As expressed by the Co-Trustees of the Trust, if we are
unable to settle, the residuary charitable distribution
(whether to the Reugh Family Foundation, the Inland Northwest
Community Foundation, or both) will not be made until all
estate tax matters are settled with the Washington Department
of Revenue and the Internal Revenue Service. Due to the
nature of the assets included in Mr. Reugh's estate,
lifetime taxable gifts made by Mr. Reugh, the taxable
distributions included in the Trust, and the provision in the
Trust that requires all estate tax and administration
expenses be paid from the residue of the estate/trust, the
Co-Personal Representatives and Co-Trustees have indicated
that they do not anticipate completing the administration of
the estate and trust, including making large distributions of
the residue, until an estate tax closing letter has been
issued by the Internal Revenue Service and the Washington
Department of Revenue. Because the size of the taxable
estate, and the very high likelihood Mr. Reugh's estate
will be audited by the Internal Revenue Service, this audit
and estate administration could be as short as a couple of
years or could stretch out for a decade (or longer) if there
is any estate tax litigation. There is no way of knowing for
certain the timing of when the Internal Revenue Service or
the Washington Department of Revenue will begin its review of
the estate tax returns filed for Mr. Reugh's estate.
CP at 202-04.
January 27, 2017, legal counsel for the Reugh children sent
the Community Foundation's counsel a letter. The
children's counsel acknowledged an earlier offer, but
stated a closer inquiry into the facts surrounding the trust
had led the children to conclude that Wendell Reugh never
intended to activate the trust. The children now believed the
trust to be invalid because the trustor named himself as the
initial trustee and because the trust was to be funded with a
$100 transfer that Reugh never consummated. The January 27
. . . [I]n the event Inland Northwest Community Foundation
(INWCF) still has designs on the Reugh family's assets,
this letter is intended to encourage INWCF to spend its
resources elsewhere. As explained herein, Mr. Reugh's
intent was to ensure that his children received his assets
. . . .
. . . [I]f the beneficiaries are forced by INWCF to litigate
to carry out their father's intent, then if they prevail,
and benefit his estate thereby, they will seek recovery of
all fees and costs. RCW 11.96A.150.
In sum, this is notice of the beneficiaries' intent to
claim their father's estate absent an invalid trust
diverting his assets, and we will proceed in that vein. We
are hopeful that INWCF will appreciate the foregoing, and Mr.
Reugh's obvious intent, and avoid litigation in this
distribution. If there are any issues, please let me know.
CP at 578, 582. Wendell Reugh's children have since sued
Reugh's estate planning attorney and alleged that the
attorney failed to prepare documents to fulfill the intent of
February 27, 2017, the children of Wendell Reugh filed a
petition, under Spokane County Superior Court cause no.
15-4-00471-1, the probate case number, contesting the Reugh
revocable living trust's validity. The caption only
mentioned the estate of K. Wendell Reugh. Paragraph 1.5 of
the petition declared:
1.5 This Court has taken jurisdiction over the above numbered
probate of the Estate of K. Wendell Reugh, and thus also has
jurisdiction to hear this petition to contest the validity of
the K. Wendall Reugh Revocable Living Trust.
CP at 28-29. The paragraph referenced a footnote, which read:
RCW 11.96A.040 (superior court has original jurisdiction
in probate and trust matters); RCW 11.96A.020 (superior
courts has power and authority to administer and settle all
matters concerning the estates and assets of deceased
persons, including trust matters); In Re Estate of
Campbell, 46 Wn.2d 292, 297 (1955) (Superior court has
inherent power in probate proceedings to clarify status at
CP at 29.
week later, and on March 6, 2017, the children refiled the
petition contesting the validity of the Reugh trust under
Spokane County Superior Court cause no. 17-4-00311-7, without
dismissing the petition filed in the probate proceeding. The
caption for this petition named the estate of K. Wendell
Reugh, but the caption added the children, JoLynn
Kovalsky-Reugh, Mark Reugh, and Jim Reugh as petitioners.
This second petition included the same paragraph 1.5 and
footnote to the paragraph as found in the February 27
petition. The petition prayed for relief, in part:
Court should declare:
5.1 That Article III of the Reugh Will provision activating a
trust is invalid. Exhibit A, Last Will and Testament,