Indiana Court of Appeals Invalidates Trust for Failure to Identify Trust Beneficiary

Faegre Drinker Biddle & Reath LLP

Faegre Drinker Biddle & Reath LLP

Recently, the Indiana Court of Appeals decided the case of Wilson v. Wilson. The case involved the last will and testament (“Will”) of decedent Terrel Wilson, Sr. (“Terrel Sr.”), which purported to create a trust. Specifically, Terrel Sr.’s Will stated:

I hereby give all of the residue of my estate to my brother, Kevin Wilson, as Trustee, IN TRUST, to be distributed to my family and others as per my instructions to him.

The Will was the only document that evidenced Terrel Sr.’s intent regarding the trust created therein.

After Terrel Sr. passed away, his brother Kevin served as personal representative of Terrel Sr.’s estate. Terrel Sr.’s son, Terrel Wilson, Jr., petitioned the trial court to revoke unsupervised administration of the estate and argued that the trust in the Will was invalid because it failed to identify the beneficiaries with reasonable certainty. The trial court agreed, invalidated the trust, and directed intestate distribution of Terrel Sr.’s residuary estate.

Indiana Court of Appeals Decision

The Indiana Court of Appeals affirmed. The court acknowledged that, under Indiana Code § 30-4-2-1(c), no formal language is required to create a trust. Nonetheless, this section requires that “the terms of the trust [ ] be sufficiently definite so that the trust property, the identity of the trustee, the nature of the trustee’s interest, the identity of the beneficiary, the nature of the beneficiary’s interest and the purpose of the trust may be ascertained with reasonable certainty.” See Opinion at 5 (quoting Ind. Code § 30-4-2-1(c)) (emphasis in original).

The Court of Appeals explained that, under this statute, the trust settlor must give the trustee the ability to determine an intended beneficiary. The court then applied this standard to the beneficiary provision here: “family and others[.]” The court first explained that “family” passes muster since Indiana’s Probate Code defines this term. But “others” is problematic. Because it is not defined in the Trust Code or the Probate Code, the court turned to the dictionary, which defines “other” as “a different or additional one.” The Court of Appeals easily determined that this definition is unhelpful to the trustee and, therefore, the trust does not identify the beneficiaries with reasonable certainty.

The Indiana Court of Appeals also rejected Kevin’s alternative argument that the trust provision is ambiguous, which would permit the use of extrinsic evidence on Terrel Sr.’s intent. The Court of Appeals explained that the term “others” itself is not ambiguous — it simply fails to identify the beneficiaries.

Going Forward

This unanimous, published opinion serves as a good reminder to Hoosiers and estate planners to be clear and precise in estate planning documents, and to review current documents to ensure they legally reflect what the testator/settlor intends. For trusts: the trust property, trustee, nature of the trustee’s interest, beneficiary, beneficiary’s interest and purpose of the trust all must be reasonably ascertained from the trust instrument itself, without resorting to extrinsic evidence. 

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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