Benavides v. Mathis, 2014 WL 1242512 (Tex. App.—San Antonio 2014, pet. denied).



Characterization of Distributions


The court determined that a beneficiary of a trust was incompetent and appointed a guardian of the estate.  A dispute arose as to the person entitled to trust income.  The guardian claimed that because the settlor created the trust before the beneficiary was married, the income was separate property.  On the other hand, the beneficiary’s wife claimed one-half of the income as community property because the trust income was income from separate property which is deemed community property under Texas law.  The trial court granted summary judgment in favor of the guardian.  The beneficiary’s wife appealed.


The appellate court affirmed.  The court recognized that ordinarily income from separate property is community property.  However, in this case, the trust was irrevocable and the beneficiary had no present possessory right to any part of the corpus.  Because the beneficiary had no such right, the beneficiary could not be considered an owner of the trust corpus and thus all distributions are the beneficiary’s separate property.


Moral:  Income distributions from an irrevocable trust are community property only if the beneficiary has a present possessory right to a portion of the corpus.