New York Estate Planning & Elder Law Blog
In the November 2020 case of Ochse v. Ochse, a Texas court heard a case that could potentially have a ripple effect on how trusts are interpreted. In this case, a mother established a trust that provided the trustee was authorized to make distributions to both the trustee’s son as well as the son’s spouse. At the time the trust was executed, the son was married to his first wife, but later divorced and married a second wife. The son’s children then initiated legal action against the son for breaching fiduciary duties as trustee and joined with the first wife who is also the mother as necessary parties. The first wife and son then filed competing summary judgment motions addressing whether the first or second wife was the son’s “spouse” as referenced in the trust. The trial court then held that the second wife was the correct beneficiary at the time of the suit. The first wife subsequently appealed.
What the Case Involved
The second wife and son argued that the use of the word, “spouse”, in trust documents did not mean the first spouse’s actual name. Instead, these parties argued that the term referred to the class of whoever was currently married to the son. The court of appeals, however, disagreed. The first wife argued that in the absence of contrary intent, a gift to a “spouse” of a married individual must be construed to mean the spouse at the time of the document’s execution instead of a future spouse. The first wife further argued that the terms “primary beneficiary’s spouse” as well as “son’s spouse” referred to the first wife because she was the son’s spouse at the time that the trust was executed. Both interpretations requested the court to view spouses as either statuses or class gifts.
The court found that these interpretations, however, are inconsistent with the Texas precedent addressing the use of classes in trusts and wills. The court also found that these measures fail to “harmonize” the provisions of the irrevocable trust. Class gifts are defined as the gift of an aggregate sum to several individuals of uncertain number at the time of the gift. In this situation, it was possible to identify a specific spouse at the time that the trust was executed in 2008. The court found that no evidence exists, however, that the term “spouse” was utilized to define a body of individuals uncertain at the time of the gift. As a result, the court held that the grantor’s use of the word, “spouse”, referred to William’s spouse at the time the trust was executed and did not refer to a class of individuals including future spouses. Consequently, the court reversed and rendered for the first wife.
Lessons Learned from Ochse
Ochse should act as a reminder that it’s critically important to define the terms of a trust. With inadequate definitions, trusts can end up being administered in a manner that does not achieve the trust creator’s goals.
Speak with a Knowledgeable Estate Planning Attorney
If you or a loved one needs the assistance of an experienced estate planning lawyer, you should not hesitate to contact Ettinger Law Firm to schedule a free case evaluation. Our attorneys understand that no two estate plans are ever the same and remain committed to achieving each of your unique estate planning goals.