Trusts Flashcards
Husband can bequeath his probate assets to the trustees of a revocable trust created by Wife. The disposition of those assets will be governed by the terms of the trust, including amendments made after Husband executed his will.
Under the Uniform Testamentary Additions to Trusts Act and Uniform Probate Code (UPC), a person may bequeath assets to a trust created during the testator’s lifetime, by the testator or another, so long as the trust is identified in the testator’s will and its terms are incorporated in a writing executed before or concurrently with the execution of the testator’s will. Under these acts, a devise is valid even if the trust is revocable or amendable. And, even if the trust is amended after the testator’s will was executed, the terms of the amendment will govern the distribution of assets bequeathed to the trust. It makes no difference that the amendment was made by someone other than the testator. One of these uniform acts or a like statute has been enacted in every state. Thus, Husband could pour his estate over to Wife’s Trust, and the amendments to that trust would govern the disposition of his estate.
Whether Son takes depends upon the construction of the amendment to Wife’s Trust. If the provision is construed to mean that Niece’s children must be 21 or older at the time they survive Niece, Son will not take. If the provision is construed to require only that Niece’s children who survive her eventually reach the age of 21, Son will take if and when he reaches age 21.
The amendment to Wife’s Trust is capable of two interpretations. The narrower interpretation is that Niece’s children must satisfy both the age and survivorship contingencies at Niece’s death in order to take. The more liberal interpretation is that the age contingency can be satisfied after Niece’s death. In construing the instrument, the court will attempt to effectuate Wife’s intent. A strong argument can be made that only Niece’s children satisfying both the age and survivorship contingencies at her death should take since the amendment specifies distribution to “children age 21 years or older who are living” when the trust terminates. However, it is hard to imagine why Wife would have wanted to exclude a child of Niece simply because the child had not yet attained the age of 21 at Niece’s death. It can also be argued that given Son was only 15 when the amendment was signed, the sole purpose of the age 21 requirement was to assure that a beneficiary was of sufficient maturity when he/she took possession of the property, and that Wife never anticipated that Niece would die only five years later. Bank could easily keep the trust open until it was clear whether the underage child could meet the age contingency. The fact that the trust amendment specifies that principal must be paid when the trust terminates, not when income beneficiaries die, might also support this interpretation of the instrument.
[NOTE: To receive credit, the applicant should not simply draw a conclusion but should demonstrate recognition that this is an issue of construction dependent on the grantor’s intent and could go either way.]
Grandchild can take a share of the trust only if Grandchild is a substituted taker for Daughter under state law. In most states, Grandchild would not be and thus would not take.
Grandchild is not a taker under the trust instrument because the gift was limited to Niece’s children who survived the trust termination and the word “children” includes the ancestor’s immediate offspring, not more remote descendants. Most state anti-lapse statutes apply only to wills and thus would not apply to the trust amendment. In these states, Grandchild would not take any share of the trust funded by gifts from Wife or from Husband’s estate.
However, some states have enacted Uniform Probate Code § 2-707 or a like statute. Under this statute, when a remainder class gift is bequeathed to a class composed of children and a child dies before the event upon which the remainder becomes possessory (here Niece’s death), a substitute gift is created in the descendants of the deceased child; words of survivorship (such as “who are living”) do not affect the creation of a substitute gift. Thus, under Uniform Probate Code § 2-707 and like statutes, Grandchild would take as the representative of the deceased child beneficiary, Daughter. However, in some states with statutes similar, but not identical, to § 2-707, the survivorship contingency contained in the trust amendment could eliminate any subsequent gift to Grandchild.
