Howard v. Howard

156 P.3d 89 (2007)

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Nature of the Case

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Facts

Leo and his first wife had three children, including Coy. Leo eventually married Marcene, who had two children from her prior marriage. They had no children together. Their estate planning created two trust agreements. Those trust agreements gave the trustee discretion to invade the principal when necessary to support the surviving spouse. Leo and Marcene transferred 60 percent of their property to Leo's trust and 40 percent to Marcene's so that 60 percent of the total estate would go to Leo's three children and 40 percent to Marcene's two children, resulting in an equal share for each child. They eventually amended the agreements. After Leo's death, and if Marcene survived Leo, his pecuniary assets were to be divided into two the Leo L. Howard Family Trust (the Family Trust) and the Howard Marital Trust (the Marital Trust). The trustee was to distribute a 'non-marital share'-the maximum amount that could pass free of the federal estate tax-to the Family Trust and the residue to the Marital Trust. The trust instrument states Leo's intention that the marital share would qualify for the federal estate tax marital deduction. The trust instrument further provides that Marcene may require the trustee 'to make any unproductive property in any marital trust productive or to convert it to productive property within a reasonable time.' During Marcene's lifetime, the net income of both trusts is to be distributed to her, and no distributions of principal are to be made from either trust. On Marcene's death, the residue of the Marital Trust is to be distributed to the Family Trust, which is to be divided among Leo's surviving children and the surviving issue of his children who predecease Leo and Marcene. The trust instrument states, 'I intentionally make no provision herein for any of my stepchildren.' Article 11.19 states, 'My support, comfort, companionship, enjoyment, and desires shall be preferred over the rights of the remaindermen. After my death, in the event my spouse survives me, my spouse's support, comfort, companionship, enjoyment, and desires shall be preferred over the rights of the remaindermen.' Leo died and is survived by Marcene, two of his children, and the three children of his deceased daughter. Marcene and Coy served as co-trustees of Leo's trusts but came to disagree about the interpretation of certain trust provisions. Marcene petitioned for an interpretation of the trusts' terms and the proper administration of their assets. The trial court concluded that the trustee must consider Marcene's support, comfort, and desires, in light of the trust instrument's terms; when the interests of Marcene and the remainder beneficiaries conflict, her interests take precedence. The court determined that the growth of the corpus was not the trusts' primary object. It held that Marcene's 'personal income and assets and financial posture * * * [are] not relevant to the administration of the trust and [are] to have no bearing whatsoever on the considerations of the trustee.' Coy appealed.