Sunday, April 28, 2013

Vesting of trust interests

On November 30, 2012 (mandate issued April 24, 2013), the Oklahoma Court of Civil Appeals addressed the timing of vesting of beneficial interests in trusts.  The trustor died on December 25, 2008.  The beneficiary in question died on February 14, 2009.  The distributive provisions provided for trusts to be established for the beneficiaries, per stirpes, at the trustor's death.  The panel's majority determined that the beneficial interest vested when the trustor died, holding that the trust could have but did not more expressly state that the beneficiary must be living at the time of the distribution.  The dissent points out, however, that the distribution provisions of the trust likewise refer to the per stirpes standard and provide that, if the beneficiary is not living at the time of distribution, the distribution shall be made to the beneficiary's children.  Here, the beneficiary had no children or other issue.  The beneficiary left a surviving spouse who would appear likely to take the trust's distributive interest under intestate succession (the opinion is not clear as to whether the beneficiary died testate or intestate).  So does the distribution go to the beneficiary's estate, or back to the trust for division among the other beneficiaries?  The majority says it goes to the beneficiary's estate.  The Oklahoma Supreme Court denied certiorari.  The dissent's position would have been stronger if the trust had said that the beneficiary's share lapses if the beneficiary is not living at the time of distribution and if the beneficiary leaves no issue.