Forty years ago, Settlor, a successful businesswoman, married a less-than-successful writer. Settlor and her husband had two children, a son and a daughter.
Two years ago, Settlor transferred most of her wealth into a revocable trust. Under the terms of the trust instrument, a local bank was designated as trustee, and the trustee was directed to distribute all trust income to Settlor during her lifetime. The trust instrument further provided that “upon Settlor’s death, the trustee will distribute trust principal to one or more of Settlor’s children as Settlor shall appoint by her duly probated last will or, in the absence of such appointment, to Charity.” The trust instrument also stated that Settlor’s power of revocation was exercisable only “during Settlor’s lifetime and by a written instrument.”
Following the creation of the trust, Settlor gave written direction to the trustee to accumulate trust income instead of distributing the income to Settlor as specified in the trust instrument. The trustee did so.
Six months ago, Settlor executed a valid will. The will, exercising the power of appointment created under Settlor’s revocable trust, directed the trustee of Settlor’s trust, upon Settlor’s death,
(1) to distribute half of the trust assets to Settlor’s daughter,
(2) to hold the other half of the trust assets in continuing trust and pay income to Settlor’s son during the son’s lifetime, and
(3) upon the son’s death, to distribute the trust principal in equal shares to the son’s surviving children (grandchildren of Settlor).
Settlor also bequeathed $50,000 “to my descendants, other than my children, in equal shares,” and she left the residue of her estate to her husband, whom she also named as the executor of her estate.
Two months ago, Settlor died. At Settlor’s death, the trust assets were worth $500,000 and Settlor’s probate assets were worth $100,000. Settlor was survived by her husband, her daughter, her son, and her son’s child (Settlor’s grandchild, age 18).
A statute in this jurisdiction provides that a decedent’s surviving spouse is entitled to a “one-third elective share of the decedent’s probate estate.” There are no other relevant statutes.
- 1. Was it proper for the trustee to accumulate trust income during Settlor’s lifetime? Explain.
2. Under Settlor’s will and the trust instrument, what, if any, is Charity’s interest in the trust assets? Explain.
3. Does Settlor’s husband have a valid claim to any trust or probate assets? Explain.