Changes Made to Testamentary Trust Were Indicative of Decedents Intent to Have Trust Last as Long as Legally Possible
In the trusts and estates appellate litigation case of In the Matter of Estate of McFadden, PICS Case No. 14-1481 (Pa. Super. Sept. 18, 2014) the Honorable David N. Wecht, writing on behalf of the Pennsylvania Superior Court, ruled that changes made to a trust between successive versions of decedent’s will indicated that decedents intent to extend the life of the trust as long as legally possible and resolved an ambiguity in the trust in favor of using decedent’s grandchildren as the measuring lives. The Decree of the Orphans’ Court was reversed.
The Appellants challenged the decree of the orphans’ court that the residuary trust contained in the will of decedent George McFadden terminated 21 years after the death of his last surviving child.
The orphans’ court ruled that, although the applicable trust language was ambiguous, based on the factors in decedent’s life during the creation/revision of the trust, the correct interpretation of the perpetuities language was that the survivor of decedent’s children, or the issue of any of decedent’s children that predeceased him alive at the time of his death.
The court noted that in the intervening period between the creation of the trust in 1928, and revision of the trust in 1930, the law regarding perpetuities had changed, switching from the strict “possibilities test” to the more flexible doctrine of vertical separability. Although the court noted factors considered by the orphans’ court, such as the 1929 stock market crash and the concentration of decedent’s estate primarily in his law firm, the court found that these were used by the orphans’ court to determine decedent’s general intent, a process disfavored by court precedent, rather than to clarify the language of decedent’s will.
Appellants argued that, because the trust provided for payment of benefits to successive beneficiaries in the form of decedent’s children’s issue, decedent intended for the trust to last as long as possible under the law in 1930.
The court found that while the testamentary scheme provided for benefits either to decedent’s children or to the children’s issue when the children had deceased, using the operative term “or”, the perpetuities clause of the trust used the term “and” to describe the classes of decedent’s children and decedent’s children’s issue as the potential measuring lives. The court further found that the trust was revised to take advantage of new flexibility in perpetuities law and to maintain principal in the trust until its termination. The court held that these factors were indicative of decedent’s intent to have the trust last as long as legally possible; accordingly, the court ruled that the orphans’ court erred in its decree, and that decedent’s grandchildren who were alive at his death were the measuring lives for the trust.
Reference: Digest of Recent Opinions, Pennsylvania Law Weekly, 37PLW918 (September 30, 2014)
Filed Under: Trust and Estates; Termination of Trust; Perpetuity Clause
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