Cite as H044213
Filed January 30, 2019, Sixth District
By Matthew R. Owens
Withers Bergman LLP
Headnote: Trusts – Termination – Method and Timing of Trust Distribution
Summary: Despite the trust’s general provision authorizing retention of trust property, the specific provision requiring the co-trustees to distribute the trust assets after the settlors died and all beneficiaries reached age 30 controlled, although they had discretion over the method of distribution.
Howard and Alice executed a trust in 1974 leaving their assets in equal shares to their six children. After they died, their six children became co-trustees with the power to act by majority vote. Nellie, one of the six children, wanted her share to be distributed in cash, while the other five siblings wanted to leave their shares in the trust for the next generation. After a disagreement with Nellie over the value of her share, the other five siblings petitioned the court asking for, among other things, determination of the value of Nellie’s share and authority to leave their own shares in the trust based on a trust provision authorizing the co-trustees to hold trust property. Nellie objected to the petition relying on the trust’s provision requiring distribution of all trust assets after both settlors died, assuming the beneficiaries had reached age 30, which they had. Finding no ambiguity in the trust and therefore declining to consider extrinsic evidence, the court ruled the age-30 provision was a specific provision that prevailed over the trust’s more general provision authorizing the co-trustees to hold trust assets. The court removed the co-trustees, appointed a private professional fiduciary as successor, and ordered that the trust assets be liquidated and distributed. The five siblings appealed.
The appellate court affirmed in part and reversed in part. The trial court correctly determined based on the specific-general rule of construction that the trust was to be distributed upon the death of the second settlor, assuming all beneficiaries had reached age 30. The trust’s retention clause was only relevant during the life of the trust and could not be used to postpone required distributions. The trial court erred, however, by compelling asset liquidation. The trust gave the co-trustees discretion regarding the method of distribution, including authority to make in-kind distributions. Although liquidation was one option available to them, it was not mandatory and the trial court could not substitute its own judgment for that of the co-trustees as to the best distribution method. The trial court also erred by removing the co-trustees since it did so based on its faulty determination they were required to liquidate the trust assets.