In re Bayley Trust

Charles Bayley’s will created a trust in 1928 that lasted over 40 years and grew to nearly $7 million. Bayley directed the trust to pay his widow at least $12,000 annual income, smaller amounts for other relatives, and annual payments to four charities including a hospital. Once the individual beneficiaries died, the trustee was to make a specific bequest to the hospital, establish separate charitable trusts, and pay a Vermont town income to maintain a park and buy shade trees. The remaining assets would go to the Boston Museum of Fine Arts (the museum) to establish a fund with the income expended only to purchase pictures and paintings. The trust paid Bayley’s widow income for 35 years until her death in 1963. By 1969, only two life beneficiaries remained. Altogether, the trust payments totaled only $5,500 a year, and the trust accumulated about $200,000 each year. The surviving individual beneficiaries agreed to set aside enough to increase their annual payments, more than double the hospital bequest, enlarge the charitable trusts, and give the rest to the museum. Per the beneficiaries’ agreement, the museum petitioned the probate court to partially terminate the trust subject to those changes. The bank that served as trustee, the beneficiaries, and the attorney general of Vermont all appeared before the court. The court confirmed that the trust was not a spendthrift trust and that distribution under the beneficiaries’ agreement would not violate a purpose of the will or restriction it imposed. The court also found prices for quality artwork had increased exorbitantly and would continue to increase in the future while inflation devalued the dollar. As a result, the court found the agreement would benefit all the beneficiaries and enable the museum to buy quality artwork before it disappeared from the market. The court approved the agreement and directed the trustee to partially terminate and distribute the trust accordingly. The bank appealed to ensure that it met its duties as trustee and to make the probate court decree effective and binding.