Opinion ID: 2105497
Heading Depth: 2
Heading Rank: 2

Heading: The Testamentary Trust

Text: It is to be noted at the outset that the validity of the testamentary trust has not been challenged. It is also to be noted that we are not concerned with the question of whether the government could collect unpaid taxes from the income of the trust fund. There appears, however, to be substantial authority supporting the proposition that the government can reach the income of the beneficiary of a trust fund to enforce its claims for unpaid taxes. 2 Scott, Law of Trusts (3d ed.), § 157.4, at 1222; Bogert, Trusts and Trustees (2d ed.), § 224, at 684. The issue with which we are here concerned, however, is whether the testator intended that the filing of a notice of levy to collect unpaid taxes would trigger the forfeiture provisions of the spendthrift trust so as to establish the discretionary trust contemplated by the testator where an attempt had been made to reach the income due the beneficiary. This intention, in our opinion, must be found within the express provisions of the spendthrift trust. It is our obligation to ascertain, if possible, the dispositive intent expressed in the will when read in its entirety and in the light of the circumstances of its formulation. Where such intent is ascertainable, if not contrary to law, it will be given effect by us. Manufacturers National Bank v. McCoy, 100 R.I. 154, 212 A.2d 53; Rhode Island Hospital Trust Co. v. Huntoon, 94 R.I. 474, 181 A.2d 614; Rhode Island Hospital Trust Co. v. Proprietors of Swan Point Cemetery, 62 R.I. 83, 3 A.2d 236. In other words, we are concerned with the question whether the testator, in the language set out in the protective clause of the spendthrift trust, made manifest his intention that the equitable life estate of the beneficiary in the income would be forfeited where some governmental agency or authority sought, through some form of legal process, to encumber the income with a lien for taxes due and unpaid. The plaintiff, pointing to the comprehensiveness of the protective clause, argues that it was the intention of the settlor that the beneficiary's life estate would be forfeited, not only upon an attempt by an ordinary commercial creditor to reach that income, but also when a taxing authority had attempted to reach the beneficiary's interest. Some of the defendants argue likewise that the filing of the notice of levy by the Internal Revenue Service so encumbered the beneficiary's interest, in part at least, by means of an attachment thereof, to come within the provisions of the protective clause and that a forfeiture resulted. Among the defendants some have argued that the imposition of a tax lien was not such an occurrence as to cause a forfeiture of the life estate of the beneficiary in the income and that the language of the protective provisions of the testamentary trust disclosed no such intent. The language of the protective clause specifically provides that if by reason of the attachment, sequestration, or taking upon execution or other legal process of the beneficial interest, or if by reason of any other process or means the beneficial interest could or would become    vested in or payable to any person, firm or corporation other than such beneficiary   , then the equitable life estate of the beneficiary would terminate and the discretionary trust would be effectuated. It is to be conceded that this language is comprehensive, but, as we read it, it contemplates the inclusion, within its scope, of process arising out of the ordinary relationship of debtor and creditor. It seems to us rather obvious that the federal or a state government is not to be included within the phrase person, firm or corporation as used by the testator in the will. It is our opinion that this language was intended by the testator to include in the broadest sense any kind of legal action intended to reach the property of the beneficiary in the fund by any person, firm, or corporation who is owed money by the beneficiary arising out of a commercial transaction of any kind. We see nothing, however, in the language used by the testator that would warrant our extending the comprehensiveness of this language to debts that might be incurred by the beneficiary in activities other than those in which he voluntarily engages in commercial transactions. We cannot agree that the testator, on the basis of the language he employed in this will, intended to immunize the beneficiary against the responsibility for every debt that was incurred by him. Rather, the intent here expressed was to accomplish that for which all spendthrift trusts are established, that is, the protection of the income of the trust against the adverse effect of the beneficiary's profligacy, incompetence, or imprudence in the management of his estate. This was obviously to be accomplished by the forfeiture of his property right in the income and by leaving his future interest therein in the uncontrolled discretion of the trustee. In our opinion, if the forfeiture provisions of these trusts are to be extended to obligations and debts incurred outside of the normal course of commercial business, that intention must be made manifest by the testator in express terms, indicating the extent to which it is to go beyond the debts incurred in the normal course of business. No such express language appears in this trust. We perceive nothing in the language employed from which it may be reasonably inferred that the intent of the testator was to relieve the beneficiary from the payment of obligations which arise out of his status as a member of society, particularly such as the payment of taxes properly and legally assessed. We have carefully scrutinized the language used by the testator and find nothing therein that is persuasive of an intention that the limitation on the liability of the income to payment of debts was to extend beyond those debts arising out of normal and conventional commercial transactions. Particularly, we perceive nothing in that language from which it could be reasonably inferred that this limitation was to apply to debts incurred by reason of his civic liabilities as a member of the community.