One Illinois court misconstrues and misapplies long-settled merger doctrine in the trust context

Charles E. Rounds, Jr.

Assume X is sole designated trustee of Blackacre and sole designated life beneficiary. Assume also that upon X’s death Blackacre is to pass outright and free of trust into X’s probate estate. In such a case there never was a trust, all interests, both legal and equitable, having merged in X. X simply held Blackacre outright and free of trust from the outset. On the other hand, if upon X’s death Blackacre is to pass outright and free of trust, say, to those who would be X’s heirs at law, then there would be no merger. Reason: X would be sharing the equitable interest with others. What if X were also to possess a fiduciary or non-fiduciary power of appointment? That would have no bearing on whether or not there is a merger. This has long been settled doctrine. See Nat’l Shawmut Bnk v. Joy, 315 Mass 457, 53 N.E.2d 113 (1944). One Illinois court, however, still has not gotten the message. See Chicago Police Sergeants’ Assn. v. Pallohusky, 128 N.E.3d 436 (Ill. App. 1 Dist. 2019). Merger doctrine is discussed generally in §8.7 of Loring and Rounds: A Trustee’s Handbook (2019). The section is reproduced in the appendix immediately below.

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Charles E. Rounds, Jr.

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