Trust, estate and probate law has many interesting quirks. An example of this is the equitable retainer doctrine. In short, it is a legal concept which, in practice, reduces the amount of inheritance a heir may receive if the heir had a debt to the deceased. In other words, if you are to inherit money from someone, and you owed money to that person, the amount you receive will be decreased in the amount of the debt. The reasoning behind this principle is that the indebtedness of the heir or legatee constitutes an asset of the estate, which the personal representative may collect for the benefit of other heirs or legatees. In re Lietman’s Estate, 50 S.W. 307, 309 (1899). Equitable retainer may exist whether the heir or legatee was indebted to the deceased before death or contracted a liability to the estate thereafter. Id.
The concept has now been codified statutorily in Section 473.630, RSMo. Equitable retainer does not exclusively apply to decedent estates. Missouri cases have also suggested that it may be applied to a beneficiary’s interest in a trust estate. Further, one of the more peculiar aspects of the equitable retainer doctrine is that the statute of limitations is not a bar to its application. Johnson v. Johnson, 179 S.W.2d 605, 609 (Mo. 1944).
Although it is rarely invoked, it is important to be aware of all facts and the applicable law if someone is trying to use the equitable retainer theory. Many estate and trust disputes arise between family members and it is not uncommon from experience that some family members will attempt to use the theory to lower another family member’s inheritance.
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