Reynolds v. Reynolds

In 1957, Minnie Sledge established a trust through her will. Sledge placed a farm in the trust for the benefit of her present and future grandchildren. The trust transferred ownership of the farm to a trustee, who had full authority to sell, manage, and otherwise dispose of the trust property as he saw fit. The trustee was authorized to distribute trust income to Sledge’s grandchildren for their support. The trustee had absolute discretion to determine the timing and necessity of any disbursements. Once Sledge’s youngest grandchild reached the age of 21, the trust corpus was distributable in equal shares to the grandchildren then living. Margaret Reynolds (defendant) was one of Sledge’s grandchildren. Margaret married Glynn Reynolds (plaintiff). During the Reynoldses’ marriage, Margaret received $11,913 as distributed income from the trust, most of which she spent on clothing and other household expenses. At the time of the Reynoldses’ divorce, about $555 remained. In addition, the trustee held about $11,400 in undistributed income in which Margaret had an interest. Margaret had not executed an affidavit under state law that would have had the legal effect of making any trust income her separate property. Glynn argued that both the distributed and undistributed trust income were community property. The trial court decided that both categories of trust income were Margaret’s separate property on the theory that she was not the owner of the trust property and that the amounts were, in effect, gifts to her. The court of appeal found that both categories of income were fruits of Margaret’s separate-property interest in the Sledge trust and therefore community property because she had not filed the relevant affidavit. The Louisiana Supreme Court reviewed the matter and initially agreed with the trial court but then granted rehearing.