October 25, 2021

Volume XI, Number 298

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October 25, 2021

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Court Reversed Trial Court On Interpretation Of Trust Regarding Per Stirpes Versus Per Capita Distributions

In In the Interest of Riley Family Revocable Trust, a trustee filed suit for a declaration regarding who takes in the distribution of remaining trust property. No. 13-20-00084-CV 2021 Tex. App. LEXIS 5839 (Tex. App.—Corpus Christi July 22, 2021, no pet. history). In article two, section 2.01, the Trust states:

Upon the death of both Trustors, the primary residuary beneficiaries of this Trust are the children of the Trustors, BARBARA JEAN RILEY JONES, BRENDA JUNE RILEY BRAGG, STEPHEN MARCUS RILEY, and ELAINE RILEY, and their descendants… For purposes of this Trust Agreement, the terms “issue” or “descendant” shall not include any child adopted by a grandchild of the Trustors.

Id. Section 6.01(A) states, in relevant part, that “household furnishings and personal effects” shall be distributed “to the surviving children and grandchildren of the Trustors…” Id. Section 6.01(B) states in its entirety: “The Trustee shall distribute the remaining Trust Property, in equal shares, to the children and grandchildren of the Trustors who survive both Trustors.” Id.

Section 9.01 defines “descendants” as “the natural-born children of the person designated and the issue of such children, but shall not include any persons adopted by the issue of such children” and beneficiary “means a person to whom assets are or may be currently distributed.” Id. Per section 9.01(I), “property distributed ‘per stirpes’ to the descendants of an individual shall be divided into as many equal shares as there are children of the individual either then living or then deceased leaving one or more descendants then surviving; each surviving child (if any) shall take one share and the share for a deceased child shall be divided among his or her descendants in the same manner.” Id.

The trial court found that the beneficiaries were entitled to per stirpes distributions. The court of appeals disagree, holding:

The parties do not dispute that the Trust imposes a condition of survivorship. They do, however, interpret the condition differently. Appellants suggest that only the children and grandchildren who survived both Trustors take, in equal shares. On the other hand, appellees contend the trial court did not err in determining that all surviving descendants of Trustors take, per stirpes. We note, however, that appellees’ interpretation of the trial court’s order to include those descendants who survived Trustors, is an inaccurate interpretation as not all descendants were apportioned a share. Rather the trial court’s order divided the Trust into four equal portions: one for each child of the Trustors; and because Brenda did not survive both Trustors, the trial court divided her 1/4 share amongst her six children, one of whom was deceased and his share was given to his daughter, Brenda’s grandchild. Accordingly, the trial court’s order did not divide the Trust amongst all the Trustors’ descendants “in equal shares,” as implied by appellees.

Appellees argue that we must find that section 6.01(b) of the Trust affirms, rather than contradicts, section 2.01, however “we must give effect to, and harmonize, all the language, even if the second and third clauses might initially appear inconsistent or contradictory to the entire first clause.” Having read the entire Trust and examined the relevant clauses and definitions, we also consider the document’s structure for indications of intent. While section 2.01 is the “identification of beneficiaries,” we note that article six states specifically that it “shall control the disposition of all property of the Trustor’s upon the death of the surviving Trustor.” Article six does not conflict with the identification of beneficiaries, but rather it serves to clarify who takes and in what amount. Accordingly, to give full effect to section 2.01, we read it to identify who the beneficiaries of the Trust are and note that per the definition, beneficiaries “may” be entitled to take in distribution of the Trust. We construe section 6.01 as controlling the distribution of the Trust, distributing in “equal shares” to the “children and grandchildren of the Trustors who survive both Trustors.”

Id. Therefore, the court of appeals held that the trial court erred when it distributed the property per stirpes as the Trust does not indicate any intent to distribute the property per stirpes, but rather clearly indicates it shall be distributed in equal shares.

© 2021 Winstead PC.National Law Review, Volume XI, Number 284
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About this Author

David Johnson Financial Institution lLtigation Winstead Law Firm Fort Worth Texas
Managing Shareholder - Fort Worth

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the Texas Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary field in Texas. 

David's financial institution experience includes (but is not limited to): breach of contract, foreclosure litigation, lender liability, receivership and injunction remedies upon default, non-recourse and other real estate lending, class...

817.420.8223
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