Trust Busting (not the Teddy Roosevelt kind)

I am analyzing a trust and am reaching into my brain for the relevant legal principle that is bouncing in my head from Wills and Estates Class.

In this hypo, mean old aunt (MOA) died in the 1960s leaving only one heir, her nephew (Uncle). The terms of the trust specified that the corpus and income of the trust would remain in the hands of the trustee until Uncle reached aged 70 at which time the Uncle would receive the income from the trust. Upon Uncle’s death, the corpus of the trust would be given to Son 1 and Son 2 (both alive at the time and specifically named in the settlement documents; Uncle had no other children, but a wife–still married).

Well, fast forward to today and Uncle is on a very fixed income with a meager income from the trust but a rather substantial, to him, corpus of the trust. Son 1 and Son 2 have nice careers and would like nothing more than Uncle to have the corpus of the trust, and allow it to pass to their mother Aunt 1 upon his death.

I remember something that if all beneficiaries agree to the dissolution of such a trust, a court would order the same. Am I on the right track or completely off base? All disclaimers apply.

Saunders v Vautier. If all the beneficiaries are competent they can end the trust.

YMMV in your jurisdiction.

That’s it. Thank you. I typically insert one of these in my wills:

No beneficiary shall have any right to anticipate, sell, assign, mortgage, hypothecate, pledge or otherwise dispose of or encumber all or any trust estate established for his or her benefit under this instrument. No part of such trust estate, including income, shall be liable for the debts or obligations or any beneficiary or be subject to attachment, garnishment, execution, creditor’s bill, or other legal or equitable process.

That would seem to defeat the rule, but if MOA doesn’t have one of those, it looks like I may be a hero to my client. I see nothing in any state law that has abrogated the rule you cite. Thanks again.

I think all these provisions are idiotic. I have an 89 year old friend who gets only the income from his parents’ estate. They didn’t trust him. But he really needs the money and cannot touch it. I don’t know who the ultimate beneficiary is.

If the original trust had no provisIon for the corpus to go to Uncle under any circumstances, simply dissolving the trust may not get you where you want to go. There may have to be a separate transfer from the sons to the uncle, which may be a taxable event or a draw upon their lifetime gift tax exemption. It’s also possible that Uncle may not wish to forgo the assured income for the unenforceable promise of a gift.

Disclaimer: I’m not your lawyer. What I say may be wrong and should not be relied upon.