Howard v. Howard

The Facts

• T established a trust
• Trust was to go to (Marcene) W for life, the remainder to (Coy) S.
• T had 3 children, including S, by W1
• When W1 died, T married W in 1961, who had 2 children from her prior marriage.
• T and W had no children together
• In 1992, T and W went to L to prepare trust agreements to replace their earlier wills.
• Trust agreements gave trustee the discretion to invade the principal when necessary to support the surviving spouse.
• T and W put 60% of their assets in T’s trust and 40% of their assets in W’s trust, wanting 60% of the estate to go to T’s 3 kids and 40% of the estate to go to W’s 2 kids, which would result in equal shares for each child.
• Trust agreements were amended in 1999
• T’s trust agreement now said that if T died and W survived him, his trust would be divided into two trusts, one family and one marital.
• Trustee was to put the maximum amount allowed before incurring federal estate tax into the family trust and everything else into the marital trust
• W would be allowed to require the trustee to make any unproductive property productive within a reasonable time
• During W’s lifetime, the net income of both trusts is to be distributed to her and no distributions of principal are to be made during W’s lifetime.
• At W’s death, the residue should be transferred from marital trust to family trust to be distributed equally among T’s children and their surviving issue.
• Purposely made NO provision for T’s stepchildren
• Does not require trustee to take other income or property of a beneficiary into account.
• Trust said that instant beneficiary’s support, enjoyment and desires were preferred over that of any remaindermen

Procedural History

• W and S disagreed on the interpretation of certain terms of the trust
• W petitioned the court for an interpretation and a proper administration of their assets
• TC instructed trustee not to consider W’s other assets in administering and making investment decisions for the trust, concluding that when the interests of W and remainder-men conflict, her interest takes precedence.

The Issue

Whether a trustee should take a beneficiaries other assets into account when making discretionary distributions

The Rule

• The trustee must carry out his duties in light of any preference expressed in the trust instrument

The Holding/Disposition

• NO, affirmed

Court’s Reasoning

• All income is to be paid to W w/ no reference to her needs or other resources
• T knew how to give such an instruction, but didn’t
• Her support trumps that of the remainder-men

Comments are closed.