Court Interpreted the Phrase “In Equal Shares Per Stirpes” in a Trust Document

by Winstead PC

In Archer v. Moody, the litigants in the declaratory judgment action were remainder beneficiaries of a trust created in 1934 and owned a 15,000-acre ranch near Junction, Texas. No. 14-15-00945-CV, 2017 Tex. App. LEXIS 11642 (Tex. App.—Houston [14th Dist.] December 14, 2018, no pet. history). The legal dispute focused on how to calculate the fractional shares of the trust estate allocable to the remainder beneficiaries when the trust terminated in 2014. The issue was whether the grandchildren should be treated equally (1/8 share each) or whether they should take an interest in their parent’s share (some individual shares increase from 1/8 to 1/6 and others decrease from 1/8 to 1/12). The court described the trust’s language as follows:

Under Article III, W.L. Moody, III’s grandchildren are remainder beneficiaries entitled to share in the trust estate at the trust’s termination upon Bill Moody’s death. Article III distributes the trust estate upon termination as follows: “. . . [T]he Trustee shall, upon the termination of the Trust, distribute the Trust Estate in equal shares per stirpes to the then living grandchildren of William Lewis Moody, III, and the surviving issue of his deceased grandchildren.”

Id. The court’s task was to determine the meaning of the phrase “in equal shares per stirpes” in Article III. The court concluded: “Article III’s operative phrase ‘in equal shares per stirpes’ requires an initial division of the trust estate in thirds among W.L. Moody, III’s three children; W.L. Moody, III’s grandchildren share equally in the 1/3 share of the sibling from whom they are descended.” Id. The court explained:

“Per stirpes” is defined as “[p]roportionately divided between beneficiaries according to their deceased ancestor’s share.” The grandchildren are descendants of W.L. Moody, III’s three children: Edna Moody, Virginia Moody, and Bill Moody. By instructing that the trust estate be disbursed to W.L. Moody, III’s grandchildren “in equal shares per stirpes,” Article III contemplates a distribution to the grandchildren dependent on their deceased ancestor’s share. The deceased ancestors here are Edna Moody, Virginia Moody, and Bill Moody. Second, the Edna and Virginia Moody Appellants’ interpretation of Article III’s operative phrase comports with an examination of the trust instrument as a whole.…

Third, cases and secondary sources analyzing similar dispositive language provide additional support for the interpretation of Article III advanced by the Edna and Virginia Moody Appellants…. The Restatement (Second) of Property also supports the Article III interpretation advanced by the Edna and Virginia Moody Appellants. It concludes that a “per stirpes” class distribution requires a distribution by ancestor: “If a gift is made to the ‘grandchildren’ of a designated person ‘per stirpes,’ the described class members stem from different children of the designated person. In such case, the words ‘per stirpes’ suggest an initial division of the subject matter of the gift into shares, one share for the children of each child of the designated person, thereby overcoming the per capita division otherwise called for by the rules of this section.” Restatement (Second) of Prop.: Donative Transfers § 28.1 cmt. i. (1988) (emphasis added).

Id. The court concluded: “Accordingly, the trust estate initially is divided into three shares for each of W.L. Moody, III’s children, and the grandchildren share equally in the 1/3 interest of the sibling from whom they are descended.” Id.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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