Keisling v. Landrum, 218 S.W.3d 737 (Tex. App.—Fort Worth 2007, pet. denied).


Interpretation and Construction


Husband established a testamentary trust for Wife under which Wife was to receive distributions only if her “own income and other financial resources from sources other than from this trust are not sufficient” to maintain her in the standing of living they had while married. Because Trustee had made no distributions, Wife filed suit claiming that “other financial resources” referred only to income and thus Trustee should distribute trust income to her as soon as her own income could not support her standard of living. Trustee asserted that “other financial resources” means assets as well as income and thus Wife must exhaust all of her assets, except for one house and one vehicle, before being entitled to distributions from the trust. The trial court agreed with Trustee and Wife appealed.

The appellate court reversed. The court agreed with Wife that the trust did not show that her husband “intended the trust to be a parachute to protect [Wife] from poverty after she had exhausted all of her own assets.” Keisling at 742. Instead, the court concluded, the trust’s purpose was to “step in and pay for [Wife’s] high standard of living” such as multiple homes, vehicles, cruises, gifts to others, shopping and maid service. The court said it would be “nonsensical to require [Wife] to sell all of her vehicles and other assets * * * just so the trust could ‘step in’ and provide her with funds to purchase new assets and vehicles to replace them.” Keisling at 742.

The court concluded that Husband’s will was unambiguous and then adopted the language of Restatement (Third) of Trusts § 50, comment, that the term “other financial resources” refers only to “income and other periodic payments, such as pension or other annuity payments and court-ordered support payments.” Keisling at 743.

The court recognized, however, that Trustee also “has a competing responsibility to manage the trust prudently and responsibly to preserve it for her future support and maintenance.” Keisling at 743. Thus, Trustee is not required to give in to Wife’s every request but must distribute for her maintenance and support. The court explained that “[b]ecause the trust’s purpose is to provide for [Wife’s] high standard of living both now and in the future, [Trustee] is required to use his discretion in distributing funds so that the trust is not depleted rapidly and wastefully.” Keisling at 744.

The appellate court did not determine the size of any distribution to Wife but instead concluded that “the trial court must now determine what [Wife’s] standard of living was then make trust distributions to compensate [Wife] from the date of [Husband’s] death.” Keisling at 745.

Moral: A settlor must make it extremely clear whether distributions from a support trust are for the “first” or “last” dollars of support as well as the standard of living that the trust is to support.