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Trustee that he had withdrawn from college, did not intend to continue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.