In re Trust of Killian

Anne Hamilton Killian was the principal shareholder of Merchants National Bank (Merchants) (plaintiff) in Cedar Rapids, Iowa, and she established a trust in 1959 to hold the assets. Following Anne’s death, part of the trust corpus was divided into two equal trusts for her son, John Richard Killian, and daughter. John’s trust permitted distributions for the maintenance and support of John, his wife, and his descendants, and no provision terminated the distributions on John’s death. The trust gave John the power to appoint to his wife any amount not exceeding one-third of the residuary trust estate remaining at John’s death. Although John was married to Donna Killian in 1959, the trust document did not use Donna’s name. John and Donna had four children, three of whom were Kathleen Killian, Richard Killian, and Deborah L. Killian Walden (collectively, John’s children) (defendants), before divorcing. John then married Jan Barbour Killian, to whom he was still married at his death. John’s will exercised his power of appointment in favor of Jan. Merchants filed an action seeking direction on what interest Jan retained in the trust remainder, among other things. John’s children claimed the trust did not permit John to appoint Jan, arguing that the wife referred to in the trust document was Donna, not Jan. John’s children further argued that permitting Jan to continue to receive distributions from the remaining two-thirds of the trust contradicted Anne’s intent because Anne would not have wanted someone who was not her lineal descendant to share more than one-third of the trust estate. The trial court held that the trust referred to whomever was John’s wife at his death, not specifically to Donna, and that Jan remained entitled to distributions. The court of appeals affirmed that Jan was the spouse referred to in the trust and reversed the judgment that Jan was still entitled to trust distributions, because she was no longer John’s wife after his death. Jan and John’s children appealed.