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Keywords

trustwillcommon law
trustwillcommon law

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Tait v. Community First Trust Co., 2012 Ark. 455, 425 S.W.3d 684

Facts

William J. Fowler and his wife Annie R. Fowler established the Fowler Family Trust in November 2000. The trust was initially revocable and became irrevocable upon the death of either settlor. After the deaths of several beneficiaries, including William's stepsons and niece, Community First Trust Company filed a petition to construe the trust, arguing that the interests of the deceased beneficiaries lapsed because they predeceased William, the surviving settlor. The heirs contended that their interests vested at the time the trust was created and should not lapse.

William J. Fowler and his wife Annie R. Fowler established the Fowler Family Trust in November 2000.

Issue

Whether the interest of a beneficiary to an inter vivos trust lapses when the beneficiary dies before the settlor.

The question we must decide is whether the interest of a beneficiary to an inter vivos trust lapses when the beneficiary dies before the settlor.

Rule

The interests of beneficiaries in an inter vivos trust vest at the time the trust is created and do not lapse upon the death of the beneficiary prior to the death of the settlor.

The greater weight of authority holds that the interest of a beneficiary to an inter vivos trust does not lapse when the beneficiary predeceases the settlor.

Analysis

The court analyzed the common law principles regarding inter vivos trusts and determined that the interests of the beneficiaries vested at the creation of the trust. It distinguished between the rules applicable to testamentary trusts and those applicable to inter vivos trusts, concluding that the death of a beneficiary before the settlor does not cause a lapse of interest in an inter vivos trust.

The court analyzed the common law principles regarding inter vivos trusts and determined that the interests of the beneficiaries vested at the creation of the trust.

Conclusion

The Arkansas Supreme Court reversed the circuit court's decision, holding that the interests of the deceased beneficiaries did not lapse and remanded the case for further proceedings consistent with this opinion.

We now hold that the interest of a beneficiary to an inter vivos trust vests at the time the trust is created, and thus the beneficial interest does not lapse when the beneficiary predeceases the settlor.

Who won?

The heirs of the deceased beneficiaries prevailed in the case because the court found that their interests in the trust did not lapse upon the death of the beneficiaries.

The heirs of the deceased beneficiaries prevailed in the case because the court found that their interests in the trust did not lapse upon the death of the beneficiaries.

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