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Welch v. Crow, 206 P.3d 599, 2009 OK 20

Facts

Betty J. Neighbors created the Betty J. Neighbors Revocable Trust on April 12, 1995, naming herself as the sole trustee and beneficiary during her lifetime. Upon her death, the trust was to be administered by her daughters and son-in-law, with the remaining assets distributed equally to her daughters. Neighbors also executed a will that directed her estate to be distributed to the trust. After her death, her grandchildren, the children of her deceased son, filed a petition claiming entitlement to a share of the trust as pretermitted heirs.

On April 12, 1995, Betty J. Neighbors (Neighbors) created the Betty J. Neighbors Revocable Trust (the Trust), of which she was the sole trustee and only vested beneficiary during her life. Upon its creation, some of her property was conveyed into the Trust.

Issue

The main legal issues were whether the pretermitted heirs statute (84 O.S.2001 § 132) applies to revocable inter vivos trusts and whether a trust is considered illusory if the same person is the sole trustee and only vested present beneficiary, but there is a contingent beneficiary.

The issues presented are whether: 1) 84 O.S.2001 § 132 is applicable to revocable inter vivos trusts; and 2) a trust with the same person as sole trustee and only vested present beneficiary, which also provides for a contingent beneficiary, is illusory.

Rule

The court ruled that the pretermitted heirs statute does not apply to revocable inter vivos trusts and that a trust is not illusory simply because the same person is the sole trustee and only vested present beneficiary if it provides for at least a contingent beneficiary.

We hold that § 132 is not applicable to revocable inter vivos trusts and a trust is not illusory merely because the same person is the sole trustee and only vested present beneficiary if it provides for at least a contingent beneficiary.

Analysis

The court analyzed the statutory language and previous case law, concluding that the pretermitted heirs statute is explicitly limited to wills and does not extend to trusts. Furthermore, the court found that the presence of contingent beneficiaries in the trust invalidated the claim that the trust was illusory, as the law allows for trusts to be valid even when the settlor retains significant control over the trust assets.

The trustees respond that § 132 applies only to wills, and not to trusts. Our recent opinion in In re Estate of Jackson, 2008 OK 83, 194 P.3d 1269, is dispositive of the question. There, we held that § 132 'unambiguously pertains only to wills. It does not encompass a situation where a child is omitted from a trust, and we decline to extend its reach to revocable inter vivos trusts.'

Conclusion

The Supreme Court affirmed the trial court's judgment, concluding that the grandchildren were not entitled to a share of the trust and that the trust was valid.

The Trust is not illusory simply because Neighbors was the sole trustee and only vested present beneficiary during her life. Because the Trust provided for Mary K. Crow and Jean Ann Morgan as contingent beneficiaries, it was a valid trust.

Who won?

The trustees prevailed in the case because the court found that the pretermitted heirs statute did not apply to the trust and that the trust was not illusory due to the presence of contingent beneficiaries.

The Supreme Court, Kauger, J., held that: 1 pretermitted heirs statute is not applicable to revocable inter vivos trusts, and 2 a trust is not illusory simply because it has the same person as the sole trustee and only vested present beneficiary if it provides for at least a contingent beneficiary.

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