Opinion
No. 3272.
Decided October 7, 1941.
The beneficiary of a trust, if not under a legal incapacity, can transfer his interest under the trust, unless his interest is of such a character that it cannot be transferred, e.g., where the trust is for his personal support or is a discretionary trust.
A beneficiary cannot assign his interest in a trust in so far as the settler gives discretion to the trustee as to the expenditure of the income.
But where a trustee has no discretion as to the ultimate disposal of the principal by the beneficiary on termination of the trust, he may assign his interest in the principal upon attaining majority, though the trust has not yet terminated.
In such case the grantee under the quitclaim deed of the beneficiary takes only his right to a conveyance from the trustee after the trust is ended and settled.
PETITION, for the partition of certain real estate situated in Manchester. The petition was brought on December 5, 1938, by the grantees of the defendant Doris Colby Jansen, a legatee under the will of Christina L. Jacob. Trial before a master, who found that the grantor had the mental capacity to convey the property, and recommended the granting of the petition. Doris Colby Jansen was married after the execution of the will in question. She is referred to therein as Doris Colby. The material clauses of the will are as follows:
". . . I give, devise and bequeath all my estate, real, personal and mixed, wherever found and however situated, to my children, namely, Arthur O. Jacob, Walter E. Jacob, and Mabel Corning, each one-fourth, and to Lena Colby and Doris Colby, children of my daughter Gertrude, jointly one-fourth, subject to the following conditions. Whereas my son Arthur is reported as missing in action in France, I direct that his share shall be held in trust for him for a period of five years from the date of this will. If he has not then returned or been located, his share shall be divided equally among my heirs. If he returns before my decease or before the expiration of said period this trust shall immediately terminate. . . .
"I direct that the joint share of Lena Colby and Doris Colby be held until the older becomes twenty-five years of age when she shall receive one-half thereof including accumulated income. When the younger becomes twenty-five years of age she shall receive the remainder. I desire that Mabel Corning act as trustee for them, and authorize her to expend so much of the income as she may deem necessary for their support and education."
The will was executed on March 31, 1919. Doris, the younger of the beneficiaries, was born on September 20, 1916. Arthur O. Jacob did not return within the time limited by the will. Consequently his share of the estate passed to the heirs of the testatrix, and Doris thereby acquired one-fourth of Arthur's original share. By quitclaim deeds dated July 19, 1938, and August 2, 1938, Doris conveyed to the plaintiffs for a valuable consideration her interest in the real estate of which partition is sought. The deeds were drawn in accordance with the Massachusetts statutory form of quitclaim deeds (see G. L., Mass., (ter. ed.), c. 183, s. 11) and purported to "grant" to the plaintiffs "with quitclaim covenants" the land in question. Each deed recites that the grantor's "title is as legatee under the will of Christins L. Jacob."
The court, Johnston, J., accepted the report of the master "as to the facts found" and transferred without ruling the question of the plaintiffs' right to maintain the petition.
Morris D. Stein (by brief and orally), for the plaintiffs.
Samuel A. Margolis (by brief and orally), for the defendants.
The defendants' contention that the testatrix intended that any share of the estate which her granddaughters might receive by reason of Arthur's failure to return from France should become a part of the fund to be held in trust for them is not borne out by the language of the will. It is there stated clearly and without qualification that Arthur's share in the event of his failure to return within five years shall be divided equally among the heirs of the testatrix. Legal title to one-fourth of that share vested in Doris as one of the four heirs. Her power to convey that fourth cannot be seriously questioned.
The remainder of her interest in the estate stands somewhat differently. The general rule governing the power of the beneficiary of a trust to make a voluntary transfer has been thus stated:
"Both in England, and in the United States today it is clear that the beneficiary of a trust, if he is not under a legal incapacity, can transfer his interest under the trust, unless his interest is made inalienable by the terms of the trust or by statute, or unless his interest is of such a character that it cannot be transferred, as, for example, where the trust is for his personal support, or is a discretionary trust." 1 Scott, Trusts, s. 132, p. 699.
Save for the fact that in this jurisdiction a provision in a trust instrument depriving the beneficiary of the power of alienation is of doubtful validity (Flanders v. Parker, 80 N.H. 566, 569; Brahmey v. Rollins, 87 N.H. 290, 293), the rule stated above prevails here. See Eastman v. Bank, 87 N.H. 189, 192.
So far as the trust under consideration was discretionary, the interest of neither beneficiary could be assigned. Hartford v. Clancy, 87 N.H. 458, 460; Eaton v. Eaton, 81 N.H. 275, 276; Restatement, Trusts, N.H. Annot. s. 155. But the trustee was invested with no discretion concerning the ultimate disposal of the principal, one-half of which each beneficiary was to receive without restriction when she became twenty-five years of age.
Concerning those cases where by the terms of the trust a valid restraint "on the alienation of the right to receive the income but no restraint on the alienation of the right to receive the principal is imposed" it is said that although the beneficiary "is entitled to receive the income during the whole of the period of the trust," his right to receive the principal can be assigned before the expiration of that period. Thus, in Hall's Estate, 248 Pa. St. 218, "a testator created a trust under which the income was payable to his son until he should reach the age of thirty-five when the principal was to be conveyed to him. It was provided that his right to receive the income should not be liable for his debts nor be assignable by him. Before the son reached the age of thirty-five he assigned a portion of the principal. It was held that the assignee was entitled to receive the portion of the principal when the son should reach thirty-five." 1 Scott, Trusts, s. 153.3.
The rule thus applied is equally applicable to a situation such as that here presented in which the trustee, though required to exercise discretion in the payment of income, has no discretion as to the ultimate disposition of the principal.
Although the deeds in the present case were drawn in compliance with the statutory provisions of Massachusetts, the language used was adequate to transfer the title to land in this state. Smith v. Furbish, 68 N.H. 123, 159; Cole v. Company, 54 N.H. 242, 289, 290. But title to the trust res still remains in the trustee even though Mrs. Jansen has now reached the age of twenty-five years. The deeds she gave, so far as her beneficial interest in the trust was concerned, were of such right as she might have to a deed from the trustee when the trust should end and be settled. It follows that until there is a decree of distribution (P. L., c. 309, ss. 13, 14) and thereafter until the plaintiffs by bill in equity obtain an order for Mrs. Jansen to convey to them, they have no title to that part of the real estate subject to the trust on which to base a suit for partition. The petition may of course be maintained in view of the plaintiffs' ownership of that share of the estate which Mrs. Jansen received by reason of Arthur O. Jacob's failure to return from France.
Case discharged.
All concurred.