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trusttermination clause
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Second Bank-State St. Trust Co. v. Second Bank-State St. Trust Co., 335 Mass. 407, 140 N.E.2d 201

Facts

Allan Forbes created the Lonach trust on May 8, 1930, transferring securities to a bank and himself as trustees, with income to be paid to him and his wife for life, and thereafter to their children. The trust stipulated that upon the death of both Forbes and his wife, the trust estate would benefit their children and their issue, with a termination clause set for twenty-one years after the death of the last child. After Forbes' death, his executors sought to determine if any future interests in the trust corpus belonged to the estate, raising concerns about the validity of the remainder interests under the rule against perpetuities.

On May 8, 1930, the settlor transferred certain securities to himself and a bank in trust to pay the income to the settlor for life and thereafter to the settlor's wife, Josephine, for life.

Issue

Whether the remainder interests in the Lonach trust are void due to a violation of the rule against perpetuities, potentially resulting in a resulting trust in favor of the settlor's estate.

The question for determination is whether the remainder interests (other than the admittedly valid life estates of the settlor's widow, Josephine, and his children) are void as in violation of the rule against perpetuities so that a resulting trust in favor of the settlor's estate may exist.

Rule

The rule against perpetuities requires that interests in property must vest, if at all, within a certain period, typically measured by the lives of individuals in being at the time the interest is created plus twenty-one years.

The rule against perpetuities requires that interests in property must vest, if at all, within a certain period, typically measured by the lives of individuals in being at the time the interest is created plus twenty-one years.

Analysis

The court analyzed the provisions of the Lonach trust, particularly focusing on the language of paragraph Third, which established separate shares for each child of the settlor and their issue. The court concluded that the remainder interests would vest upon the death of the settlor's children, all of whom were alive at the trust's creation, thus satisfying the rule against perpetuities. The court emphasized that the settlor's intent was to create severable shares, which would not be affected by the possibility of future children being born after the trust's establishment.

We view paragraph Third as setting up a separate share of the trust corpus for each child of the settlor and such child's issue, with the devolution of that share to be dealt with separately from the devolution of the order shares.

Conclusion

The court ruled that the executors of Allan Forbes' estate have no interest in the property held in trust by the trustees of the Lonach trust, and denied their request for an accounting. The decree was to be entered in accordance with the court's opinion.

A decree, the details of which are to be fixed by a single justice, is to be entered (1) declaring that the executors of the settlor have no interest whatsoever in the property held in trust by the trustees of the Lonach trust; (2) denying the prayer of the executors for an accounting; and (3) upon the prayers for declaratory relief in the several answers, declaring the rights of the defendants in accordance with this opinion.

Who won?

The trustee and beneficiaries of the Lonach trust prevailed because the court found that the remainder interests were valid and would vest within the permissible period under the rule against perpetuities.

The executors are not entitled to an accounting. The analysis of paragraph Third already made shows that there is now no possibility of any interest returning to the settlor's estate.

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