Construction and Interpretation

Hurley v. Moody Nat’l Bank of Galveston, 98 S.W.3d 307 (Tex. App.—Houston [1st Dist.] 2003, no pet.).


Settlor created a testamentary trust for Beneficiary. The trust is to terminate when Beneficiary either (1) reaches age 35 or (2) completes his education, whichever occurs first, with the balance to be distributed to Beneficiary’s mother and uncle. The trust provides that Beneficiary is not considered as completing his education so long as he is “continuing his formal education at a recognized academic college or university which meets the approval of trustee.” Beneficiary notified Trustee that he had withdrawn from college, did not intend to continue his education, and that the trust should be terminated. The remainder beneficiaries (mother and uncle) agreed. Trustee, however, did not terminate the trust because Trustee believed that Beneficiary’s dissatisfaction with higher education was only temporary. To resolve this issue, Trustee requested a declaratory judgment regarding whether the trust had terminated under its own terms. Subsequently, Beneficiary went back to college, requested the court to continue the trust, and explained that his original withdrawal from college and request for the trust to terminate was influenced by his heavy use of illegal drugs. The court determined that the trust had not terminated. Uncle appealed.

The appellate court affirmed. The court examined the trust, especially its statement that the principal purpose of the trust is to provide for Beneficiary’s education and the Settlor’s grant of broad discretion to Trustee. The court thought it was reasonable for Trustee to view the 1.5 years during which Beneficiary did not enroll in college as a mere break in his education, not a completion. Settlor had not required Beneficiary to be continuously enrolled in college. The court also noted that Uncle had originally told Trustee that the trust should not be terminated. The court held that the trust was not ambiguous and that the trust did not terminate on its own terms.

Moral: A settlor should consider providing detailed guidance with regard to when a condition which triggers trust termination is satisfied.