Settlor’s Intent Controls Interpretation of Unclear Trust Language

July 9, 2009 | Erin Herbold

 

Here, a father of seventeen children executed a trust agreement the day before his death, appointing his wife and two sons as trustees. The trust document directed that upon the death of the man’s wife, the remaining trustees were to divide the “residuary trust” in equal shares and distribute those shares to the man’s living children. Although all of the children were not specifically mentioned in the trust document, a list of all seventeen children was included in an attachment to the trust document.  When the trust was created, four minor children were living with the couple and were specifically mentioned as the trustor’s children in Article One of the trust document. However, two other sons were mentioned in another portion of the trust and the trust directed that the residuary would be distributed generally to all of the man’s living children. 

After the wife’s death, the four grown children filed suit, claiming that they had never received distributions from the trust and the trust assets or expenses had never been accounted for by the trustees.  In addition, they asked the trial court to remove the trustees and claimed that they were the only rightful trust beneficiaries since they were the only children specifically mentioned in the trust document. 

Thus, the court was tasked with interpreting the conflicting articles in the trust document in a manner consistent with the father’s intent.  At trial, the court concluded that the father intended his entire family to benefit from the trust (all seventeen children) and declined to remove the trustees. The court reasoned that since the father attached a list of all seventeen children to the trust document, his intent was to include all of his children. On appeal, the Iowa Court of Appeals stated that the law is well-established that the court may look beyond the words of the trust agreement when there is confusion in the document to ascertain the settlor’s intent. Though the attachment naming all seventeen children was not expressly incorporated into the trust document, the court believed that the settlor’s intent was clear – he wanted to benefit all of his children.  Therefore, all seventeen children were declared beneficiaries under the trust.    In the Matter of the McKernan Trust, No. 9-263/07-2122 (Iowa Ct. App., Jul. 2, 2009)