In re Townley Bypass Unified Credit Trust, 252 S.W.3d 715 (Tex. App.—Texarkana 2008, pet. denied).
Settlor’s will created a trust for Wife with the remainder to his two
sons upon her death. Before Wife died, one of the son’s died. When Wife
died, the issue arose as to whether the predeceased son’s share would
pass to his successors in interest or to Settlor’s heirs via intestacy.
The trust did not expressly require a son to survive to receive his
interest and the trust contained a standard spendthrift provision.
Both the trial and appellate courts held that the deceased son’s
interest passed to his successors in interest. The court began its
analysis by examining the remainder interest granted to each son by
their father’s will. Because the interest was in ascertainable persons
and there was no condition precedent other than the termination of the
prior estate (Wife’s death ending her life estate), then the remainder
was vested.
The court next determined as a matter of first impression in Texas that
the spendthrift clause did not prevent the predeceased son’s vested
remainder interest from passing under his will despite the existence of
a spendthrift provision restricting the transfer of the son’s interest
prior to his receiving the property. The court was impressed with the
reasoning of Restatement (Third) of Trusts § 58, reporter’s notes, cmt.
g (2003), which provides that “[a] continuing income or remainder
interest in the trust, despite the spendthrift provision, is
transferable by will or intestacy.” Townley, at 720. The court stressed
that a spendthrift provision is designed “to protect the beneficiary
from his or her own folly, a purpose that cannot be promoted after the
beneficiary’s death.” Townley, at 721.
Moral: A trust should expressly state the disposition of trust property
if a remainder beneficiary predeceases the life beneficiaries.