Court Opinion

ID: 9684507
Source: CourtListenerOpinion
Date Created: 2023-08-24 13:59:21.339218+00
Date Added: 2024-06-11T18:17:56.503582
License: Public Domain

KENNETH W. SHRUM,
Presiding Judge, concurring in part and dissenting in part.
I respectfully dissent, in part, from the principal opinion.
First, I disagree with and dissent from the principal opinion to the extent, if any, that it purports to hold that Settlor em*606powered the trustees to distribute non-marital trust corpus to Respondent for any purpose. The trial court found that the “marital trust was expended by year end 2000.” The record supports that finding. Where, then, is authority for distributing to Respondent corpus from the other trust, i.e., the non-marital trust corpus? I can find no such authority. Certainly, it is not in Article II B.4 which deals with distributions from the non-marital trust. It reads:
“4. Distributions from Non-Marital Trust. The Trustees shall hold, administer and distribute the property comprising the Non-Marital Trust in the following manner:
“(a) If Settlor’s spouse shall survive Set-tlor, the Trustees shall pay at convenient intervals ... so much of the net income from the Non-Marital Trust to Settlor’s spouse as the Settlor’s spouse shall request from time to time.
“(b) The Trustees may pay to Settlor’s spouse so much of the principal of the Marital Trust as the Trustees in their discretion deem necessary to provide for the health, education, support or maintenance of Settlor’s spouse (in accordance with the standard of living which was maintained during Settlor’s lifetime.)
“(c) The Trustees shall pay, upon the request of Settlor’s spouse such additional amount from the principal of the Marital Trust as may be requested by Settlor’s spouse, provided, however, that such additional distribution under this Paragraph (c) shall not exceed, in any one (1) year, the greater of five (5%) percent of the principal value of the Marital Trust; or Five Thousand ($5,000.00) dollars.” (Emphasis supplied.)
By the express terms of subsections (a), (b), and (c) of Article B.4, net income is the only distribution authorized for Respondent from the non-marital trust. Distribution of the principal from the non-marital trust is not authorized by Article II B.4(b) or Article II B.4(c); those subpara-graphs only authorize corpus distributions from the marital trust. To the extent the parties, the trial court, or the principal opinion read this provision differently, I simply disagree.
Moreover, any attempt to explain away the clear language of Article II B.4(2) and Article II B.4(3) by claiming ambiguity in the document is, in my opinion, unavailing. The trial court appears to have found the instrument unambiguous.1 On appeal none of the parties argue that the trust was ambiguous. To the contrary, in Point II, Appellant specifically argues that the trust is not ambiguous and Respondent appears to agree. Thus, Respondent in her brief asserts, “The Trial Court’s interpretation of the trust at issue is supported by the terms of the trust instrument and does not depend on extrinsic evidence.” *607Arguably, the ambiguity issue is settled. If that view is correct, it is clear that Respondent was never entitled to corpus distribution from the non-marital trust.
Second, I dissent from that part of the principal opinion which holds that Settlor made an absolute gift of marital trust corpus to Respondent “for respondent’s health, education, support, or maintenance” and that “Respondent’s other sources need not be considered in determining the amount to be paid for that purpose from principal[]” of the marital trust. I dissent because, in my view, the Winkel case (upon which the principal opinion is grounded) is distinguishable. I would hold that the analysis and the result in Hertel ex rel. Hertel v. Nationsbank N.A., 37 S.W.3d 408, 411 (Mo.App.2001), should govern here.
The corpus encroachment language in Winkel was couched in mandatory terms, i.e., it directed that trustee “shall pay the net income and any part of the corpus of the estate ... as [trustee] in his sole discretion deems necessary ... for the support [of the named beneficiary].” 295 S.W.2d at 57. The Winkel opinion recounted at length the relevant circumstances underlying the creation of the subject trust and reviewed the conflicting authorities on the issue of whether a beneficiary is entitled to support out of the corpus of a trust fund when he has other resources. Based on that analysis and the mandatory language quoted above, the Winkel court concluded that the testator intended an absolute gift of support to the beneficiary; that the discretion of the trustee was limited to deciding the amount necessary for that purpose; and that the trustee was not authorized to consider other income resources that the beneficiary might have. 295 S.W.2d at 62.
In so deciding, the Winkel court embraced the view that when “ ‘the trustee is directed to pay to the beneficiary or to apply for him so much [of the trust corpus] as is necessary for his maintenance or support, the inference is that the settlor intended that [the beneficiary] should receive his support from the trust estate, even though he might have other resources.’ ” 295 S.W.2d at 60-61 (quoting Scott on Trusts, 2d Ed sec. 128) (emphasis supplied).
The Hertel court reached a different result than the Winkel court, but did so because the facts were different. The Hertel trust read, inter alia:
“[T]he Trustees shall have power in their discretion to encroach upon the principal of this share of the trust estate during the life of Grantor’s daughter for her health, education, maintenance and support and such encroachments may be made from time to time and in such amounts as the Trustees may consider necessary or advisable under the circumstances.”
37 S.W.3d at 410-11.
This language was interpreted by the eastern district as not making an absolute gift of trust corpus; consequently, the Hertel trustee “should not be denied the opportunity to consider beneficiary’s other financial resources when deciding whether it is appropriate to encroach upon the trust principal.” Id. at 413. The Hertel court explained:
“[T]his provision ... grant[s] Trustees the power to encroach upon the principal in their discretion. Use of the word ‘may’ grants Trustees discretion to encroach upon the principal when and in any amount they consider necessary or advisable.
“Further, we find that the ‘necessary or advisable’ language applies to the amount of the encroachment as well as to its timing. Thus, Trustor intended *608Trustees to exercise their judgment and discretion in determining whether an encroachment for the health, education, maintenance, and support of Beneficiary is necessary or advisable, and whether the amount requested is necessary or advisable.”
37 S.W.3d at 411.
The Hertel court also found its holding was not inconsistent with Winkel:
“Whereas the Winkel trust provided the trustee ‘shall pay the net income and any part of the corpus,’ this trust states ‘such encroachments may be made.’ Moreover, the placement of the discretionary language in Winkel suggests the discretion applies only to the amount of principal to be paid out. The discretionary language herein is applicable to the Trustees’ general power to encroach.”
37 S.W.3d at 413.
I believe the “corpus encroachment” language here is more akin to that in Hertel; consequently, the Hertel analysis should govern. My reasons follow.
First, the “corpus encroachment” provision in Winkel was in a single, mandatory paragraph, i.e., the trustee “shall pay the net income and any part of the corpus.” In contrast, here (as in Hertel), directions about paying net income and corpus are in separate paragraphs. Specifically, Article II B.3(a) of this trust provided the trustee “shall pay the net income” to Respondent, whereas Article II B.3(b) recites that trustee “may pay” so much of the corpus “as the trustees in their discretion deem necessary” for Respondent to maintain the standard of living she had during Settlor’s lifetime. (Emphasis supplied.)
Second, Article II B.3(b) contains only discretionary language. In my view, the discretionary language that permeates Article II B.3(b) bespeaks an intent by Set-tlor not to make an absolute gift of corpus, but rather to authorize invasion of marital trust corpus only in case of need.
Third, my view that Winkel is distinguishable is strengthened by examining the relevant surrounding circumstances underlying the creation of these respective trusts. The Winkel court found it noteworthy that the trust purpose was to provide support and maintenance for a beneficiary who was. living “at the Emmaus Home;” that this and the uncertainty about the beneficiary’s sources of support, amounts of support, and future needs supported an inference that the Winkel trustor was not primarily interested in preserving an estate, but rather his focus was on making provision for the needy relative. In sharp contrast, the trust here was simply part of an estate plan; its purpose was minimizing federal estate tax obligations. In my view, that explains the discretionary language used here.
Fourth, many other circumstances discussed and deemed relevant in Hertel also exist here. Illustrative is the fact that both trusts have “spendthrift” provisions. Id. at 413. This and other trust provisions discussed in Hertel (which are also in the instant trust) show that Settlor intended to give the trustees power and authority to preserve and maintain the trust corpus while also allowing the trustee to accommodate for unforeseen events.
In sum, I find merit in Appellant’s second point. I would find that the Settlor intended to make an absolute gift of income to Respondent from both the marital and non-marital trusts, coupled with a provision that the principal of the marital trust could only be invaded if needed. Consequently, I would hold that the trustees must factor in Respondent’s other financial resources and income when deciding what part of the marital trust corpus, if any, was properly paid to Respondent per Article II B.3(b). I would hold that no *609part of the non-marital trust corpus is payable to Respondent. In all other respects, I agree with the principal opinion.

. At trial, while considering admissibility of testimony of the lawyer who drafted the trusts, the judge stated: “Well, what I’ve read so far, we've heard fairly straight forward paragraphs that I’ve seen in many trust documents. I don't see an ambiguity in them at this point." Later, the trial judge told the parties that he would let the trust preparer testify — not as an offer of proof — but with the understanding that he would not consider the testimony unless he found an ambiguity. Although the trial judge did not expressly rule the trust unambiguous, the judgment, when fairly read, indicates that the judge’s findings and conclusions were based on the language within the trust, and not on the trust preparer’s testimony about Settlor’s intent and meaning of the language used. I am confirmed in this by the following, which was the first conclusion of law in the judgment: “Absent an ambiguity, ... the instrument and evidence of grantor's intent is generally inadmissible.” All of the above persuades me the trial judge viewed the trust language as unambiguous.