Opinion ID: 2519823
Heading Depth: 2
Heading Rank: 1

Heading: the terms of the original trust agreement

Text: ¶ 9 It is well settled that [a] trust is a form of ownership in which the legal title to property is vested in a trustee, who has equitable duties to hold and manage it for the benefit of the beneficiaries. Continental Bank & Trust Co. v. Country Club Mobile Estates, Ltd., 632 P.2d 869, 872 (Utah 1981)(citing Restatement (Second) of Trusts § 2 (1959)). [O]nce the settlor has created the trust he is no longer the owner of the trust property and has only such ability to deal with it as is expressly reserved to him in the trust instrument. Id. (citing Boone v. Davis, 64 Miss. 133, 8 So. 202 (1886)). Thus, a settlor has the power to modify or revoke a trust only if and to the extent that such power is explicitly reserved by the terms of the trust. Continental Bank, 632 P.2d at 872; see also Kline v. Utah Dep't. of Health, 776 P.2d 57, 61 (Utah Ct.App.1989)(citing Restatement (Second) of Trusts §§ 330-331 (1959)); accord Clayton v. Behle, 565 P.2d 1132, 1133 (Utah 1977). Furthermore, [t]he creation of a trust involves the transfer of property interests in the trust subject-matter to the beneficiaries. These interests cannot be taken from [the beneficiaries] except in accordance with a provision of the trust instrument. George G. Bogert & George T. Bogert, Trusts & Trustees § 998 (2d ed. rev.1983). Thus, our analysis begins with an examination of the original trust language to see what powers Ms. Banks reserved for herself as the trustee and what beneficial interests she created. [2]
¶ 10 Article III, entitled AMENDMENT, REVOCATION AND ADDITIONS TO TRUST, clearly reserves the settlor's right to amend, modify or revoke the trust. Section 3.1 states Rights of the Undersigned.... [T]he Undersigned reserves the right to amend, modify or revoke this Trust in whole or in part.... The trust specifies that revocation or amendment of this Trust may be in whole or in part by written instrument. Amendment, modification or revocation of this instrument shall be effective only when such change is delivered in writing to the then acting Trustee. However, the trust indicates that in the case of complete revocation, the Trustee shall deliver to the Undersigned, as the Undersigned may direct in the instrument of revocation, all of the Trust property. Thus, the trust specifies that for Ms. Banks to completely revoke the trust, all the property must be transferred back to Ms. Banks, after which she could presumably create a new trust or dispose of the property as she saw fit. ¶ 11 It is clear from the trust language that Ms. Banks reserved for herself the power to amend, modify, or revoke the trust in whole or in part. Any such changes were to be specified in writing and delivered to her, but in the case of a complete revocation, all the property in the trust was also to be delivered to Ms. Banks. Revocation is therefore a specific provision of the trust language and is not the same as an amendment or modification.
¶ 12 Next, we examine the trust agreement to see what interests Ms. Banks created for the trust beneficiaries. Section 3.2 reads, Interests of the Beneficiaries. The interests of the beneficiaries are presently vested interests subject to divestment which shall continue until this Trust is revoked or terminated other than by death. By the plain language of the trust, the beneficiaries have vested interests [3] that continue until the interests are revoked or terminated. Here, Ms. Banks reserved the power to revoke, modify, or amend the trust in whole or in part in section 3.1, but limited that power in section 3.2 with regard to the beneficiaries. Thus, a complete revocation was required to divest the beneficiaries of their vested interests. ¶ 13 Ms. Means relies on In re Estate of Groesbeck, 935 P.2d 1255 (Utah 1997) for the proposition that the language in section 3.2 merely proves that the trust is not illusory and does not restrict Ms. Banks' rights to divest the Banks children of their vested interests. Her reliance is misplaced. In Groesbeck we held that a revocable trust can be created, without being deemed illusory, as long as title to the property passes to the trustee and vested interests are created in the beneficiaries, even if these interests are subject to divestiture. Id. at 1257-58 (citing Horn v. First Sec. Bank of Utah, N.A., 548 P.2d 1265, 1267 (Utah 1976)). That is, a reservation of the power to revoke does not make a trust invalid. Id. at 1257. We further observed that vested beneficiary interests are subject to being divested by the exercise of the reserved power to amend or revoke the indenture in trust. Id. at 1258. Thus, we concluded that the trust was valid, even though the Groesbecks had reserved the right to revoke the trust and created vested beneficiary interests that were subject to divestiture via the specific provisions of the trust itself. [4] Id. at 1258. Groesbeck, therefore, does not require us to disregard the requirements of the trust language. ¶ 14 Ms. Banks reserved the right to amend, modify, or revoke the trust, specified how such changes were to be accomplished, and created vested beneficiary interests that could be divested only though a complete revocation of the trust. Our next step, therefore, is to look to the 1999 amendment to see whether it complied with the terms of the trust.