Trusts - Deviation

In re White Intervivos Trusts, 248 S.W.3d 340 (Tex. App.—San Antonio 2007, no pet. h.).

Settlors created four irrevocable trusts naming their five grandchildren as beneficiaries. Settlors’ two children (the parents of the beneficiaries) were named as the trustees. Over a decade later, trustees filed a petition to terminate these trusts claiming that Settlors’ intent was really to provide for them, not their grandchildren. Thus, deviation from the terms of the trusts would be appropriate under Trust Code § 112.054. One of the settlor’s testified that he did not understand the difference between being a beneficiary and a trustee and thus termination of the trusts would further the purpose of the trusts. Despite the lack of any additional evidence, the trial court found that a mistake was made in drafting the trusts and thus terminated the trusts. The trial court then distributed the trust assets outright to the two trustees.

The guardian ad litem appealed on behalf of the three minor grandchildren (the adult grandchildren did not appeal). The appellate court reversed with regard to the minor beneficiaries. The court explained that the trusts named the grandchildren as beneficiaries and were expressly stated to be irrevocable. The settlor’s children were clearly and unambiguously named as trustees, not beneficiaries. The court explained that deviation from the terms of the trusts was not appropriate because there was no evidence of “circumstances not known to or anticipate by the settlor” as required by the Trust Code. The only evidence was one trustee’s alleged confusion. The court also noted that no one discovered this supposed mistake for almost 14 years.

Moral: The court will not order deviation to terminate an irrevocable trust just because the settlor has “a change of heart” many years later.