Opinion ID: 1225678
Heading Depth: 2
Heading Rank: 1

Heading: Distributions to Plaintiff's Father

Text: Defendant first claims that distributing the Trust's assets to Plaintiff's father complied with his duties as Trustee. Defendant argues that the Trust Agreement granted him discretion to distribute funds to Plaintiff's father and that the Illinois Trusts and Trustees Act endowed him with authority to distribute funds to Plaintiff's father as an adult relative of the minor beneficiary. Defendant also contends that since Plaintiff's father had a legal duty to support his son, it was appropriate to distribute the funds to Plaintiff's father and it should be presumed that Plaintiff benefitted from the funds. Plaintiff contends that this case turns simply upon a violation of the express and exclusive terms of the Trust, which did not allow for distributions to his father. It is axiomatic that the limits of a trustee's powers are determined by the instrument which creates the trust. Stuart v. Continental Ill. Nat'l Bank & Trust Co., 68 Ill.2d 502, 12 Ill.Dec. 248, 369 N.E.2d 1262, 1271 (1977) (citations omitted). When a trustee fails to administer a trust according to its terms, a breach of trust results. Northwestern Mut. Life Ins. Co. v. Wiemer, 96 Ill.App.3d 549, 52 Ill. Dec. 139, 421 N.E.2d 1002, 1004 (1981) (citation omitted). When a trustee breaches a trust agreement, whether wilfully, negligently, or by oversight, he is liable for any loss to the estate resulting from the breach and must place the beneficiaries in the position they would have held had the breach not occurred. Grot, 226 Ill.Dec. 20, 684 N.E.2d at 1018 (citations omitted). The Trust Agreement provided that distributions to a minor may be applied directly in the sole discretion of the Trustee for the benefit of such person or may be made to any one or more of the following: (a) directly to such beneficiary; (b) to the legally appointed guardian . . . of such beneficiary; or (c) to a custodian under the Uniform Gifts to Minors Act in any jurisdiction. None of the money was distributed directly to Plaintiff and there was no legally appointed guardian or custodian. Defendant contends that the district court ignored the provision allowing distributions to be applied directly in the sole discretion of the Trustee for [Plaintiff's benefit]. [1] Defendant argues that by giving money to Plaintiff's father he was directly applying the money for Plaintiff's benefit. Defendant's position is that it was a direct application of funds for him to give money to Plaintiff's father and for Plaintiff's father to then give that money (likely without Defendant's knowledge) to Colgate University, for example, to pay for Plaintiff's college tuition. This proposal cannot be accepted. The existence of an intermediary makes it impossible to characterize this two-part transaction as a direct application of funds. Defendant cannot find justification for the distributions within the terms of the Trust Agreement. Defendant next contends that the distributions were permitted by the Illinois Trusts and Trustees Act. The Act grants a trustee authority [t]o distribute income and amounts of principal in such one or more of the following ways as the trustee believes to be for the best interests of any beneficiary who at the time of distribution is under legal disability or in the opinion of the trustee is unable properly to manage his affairs because of illness, physical or mental disability or any other cause: (a) directly to the beneficiary; to a duly appointed guardian of the beneficiary; (c) to a custodian for the beneficiary under the Uniform Transfers to Minors Act; (d) to an adult relative of the beneficiary; (e) by expending the money or using the property directly for the benefit of the beneficiary; and the trustee is not required to see to the application of any distribution so made; and (f) to a trust, created prior to the time the distribution becomes payable, for the sole benefit of the beneficiary and those dependent upon the beneficiary during his or her lifetime, to be administered as a part thereof. . . . 760 ILCS 5/4.20. Defendant focuses on paragraph (d), allowing distribution to an adult relative of the beneficiary. Were it applicable to this case, paragraph (d) would provide authority to distribute the Trust's assets to Plaintiff's father while Plaintiff was a minor, and thus under a legal disability. However, the Trusts Act merely establishes a set of default rules applicable when not in conflict with the terms of a trust agreement. The Act provides: A person establishing a trust may specify in the instrument the rights, powers, duties, limitations and immunities applicable to the trustee, beneficiary and others and those provisions where not otherwise contrary to law shall control, notwithstanding this Act. The provisions of this Act apply to the trust to the extent that they are not inconsistent with the provisions of the instrument. 760 ILCS 5/3(1). Defendant claims that the terms of the Act are not in conflict with the terms of the Trust. Defendant is mistaken. Comparing the language of the Trust Agreement to that of the Act only confirms that Plaintiff's father was not an authorized distributee of the Trust. The Trust Agreement mirrored paragraphs (a), (b), (c), and (e) of the Trusts Act, but excluded the option to distribute money to an adult relative and the option to distribute to a related trust. These were intentional omissions. Inclusio unius est exclusio alterius. The Trust Agreement also specifically and uniquely excluded Plaintiff's father from receiving loans, at any interest rate, and despite providing adequate security. The district court came to the natural and appropriate conclusion that the settlor, Plaintiff's father, took pains to protect the Trust's assets from his own intermeddling and his obvious intent [was] to use the trust as a preventive barrier against his own financial management. The Trust Agreement anticipated and provided for distributions to, or for the benefit of, minors; the conflicting provision of the Trusts Act, allowing distributions to an adult relative, does not apply to this case. Defendant finally argues that it was logical and appropriate to give the Trust's assets to Plaintiff's father as the person with the legal duty to support Plaintiff. This argument does not require serious discussion. Defendant cannot avoid his specifically enumerated duties and limitations under the Trust Agreement by pointing to the common law duty of parents to support their children. Similarly, it does not matter whether Defendant believed the money was benefitting Plaintiff and furthering the intent of the settlor; the Trust Agreement simply did not allow distributions to Plaintiff's father. Defendant was not authorized to distribute funds to Plaintiff's father by the terms of the Trust, by the Illinois Trusts and Trustees Act, or by any vague common sense approach. By distributing funds to Plaintiff's father, Defendant breached the express terms of the Trust and the district court appropriately held Defendant liable for the resulting losses.