Opinion ID: 1231420
Heading Depth: 2
Heading Rank: 1

Heading: Excessive Disbursements.

Text: Between 1978 and 1982 all of Winnebago stock was sold. The trustees disbursed funds to Hanson or for his benefit in the sum of $2,469,658. Over one million dollars of this sum was disbursed to the Community State Bank of Clear Lake, Iowa, for deposit to Hanson's personal checking account. As noted, the trust contained extremely broad language regarding disbursements. By using such language as comfortable support, without regard to more remote interests, and customary standard of living and station in life, and by stating that the distribution power was to be exercised liberally for the beneficiary, the trust instrument makes it clear that Hanson did not want to restrict the availability of his assets. While Hanson now insists his intent in creating the trust was to remove his ability to control the expenditure and investment of his assets, that is not what the trust instrument says. While the trust instrument easily could have specifically limited the amount to be expended on Hanson's behalf each year, Hanson instead chose extremely broad language to insure the continuation of his previous lifestyle. His customary standard of living consisted of wanton spending and risky investments. It is by denying Hanson those luxuries that the trustees would have breached their duty. We find that the expenditure of over $460,000 for the forty-seven-foot racing sailboat, the Seier, which Hanson purchased in 1981 was consistent with his previous lifestyle and standard of living. Similarly, the quarter of a million dollars Hanson lost by investing in a fledgling seafood importing business was consistent with his prior history of making speculative investments, a practice which Hanson had no intent of giving up when he amended the trust. In short, the reason the trustees made such extensive disbursements is that Hanson was incurring extensive debts. Hanson concedes that he intended for his creditors to be paid. He also concedes that he received regular accountings from Bankers Trust showing what was left in the trust, although he rarely bothered to read them. Moreover, the trust instrument contained a clause specifically authorizing the trustees to elect to pay the debts incurred by the beneficiary. The trustees could not restrain Hanson in his spending nor could they justifiably refuse to pay his debts once incurred. The spendthrift-like language in the trust would be ineffective as against Hanson's creditors. Section 156(2) of the Restatement (Second) of Trusts states: where a person creates for his own benefit a ... discretionary trust, his ... creditors can reach the maximum amount which the trustee under the terms of the trust could pay to him or apply for his benefit. See also Farmers State Bank v. Janish, 410 N.W.2d 188 (S.D.1987). Hanson was the sole beneficiary of the trust during his life. Both the corpus and its income were distributable to him without regard to more remote interests. Thus, the corpus of the trust was subject to garnishment had the trustees failed to pay Hanson's creditors. See id.; 76 Am.Jur.2d Trusts § 168 at 404-05 (1975). Even if the liberal disbursements were a breach of the trustees' duties, Hanson would be estopped to hold them liable. In Chirurg v. Ames, 138 Iowa 697, 116 N.W. 865 (1908), under somewhat similar circumstances we stated ... where the cestui is of full age, and induces the very conduct of which he complains, is satisfied with the methods adopted while they are progressing, interferes himself with the duties of the trustee, and keeps part of the accounts himself, no such strictness is required as in the ordinary case. Id. at 707, 116 N.W. at 868. If a trust beneficiary consents to an act of the trustee prior to or during the commission of the act, he cannot hold the trustee liable for it. Restatement (Second) of Trusts § 216(1); In re Poulsen's Estate, 54 Wis.2d 139, 194 N.W.2d 593 (1972). Because Hanson incurred substantial debt, knowing that trust assets would have to be sold to pay those debts, he effectively consented to the sale of stock and distribution by the trustees of the proceeds to pay those debts. Minette who was authorized as Hanson's attorney-in-fact to do generally all things necessary to conduct any business or private matters whatsoever on [Hanson's] behalf, authorized the sales of stock. Hanson is estopped to complain of the disbursements.