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Whose interests in a trust take priority - the maker of the trust or the beneficiaries?

Posted by Gayla Austin | Jul 12, 2020 | 0 Comments

There has always been an underlying friction in American trust law between balancing the wishes of the maker of the trust and the beneficiaries' interest in the trust.  This balancing act is natural because the maker of the trust transfers legal title of assets to the trustee and the equitable interest to the trust beneficiaries. 

Should the interest of the maker of the trust take priority over the interests of the beneficiaries?  

Historically, American trust law has favored the maker of the trust.  As a result, fiduciaries have an obligation to follow the terms of the trust or will.   This is because trust law since the early days of this country (Claflin, 1889) found that the maker of a trust has a right to dispose of his own property with any restrictions, as he sees fit, unless they contravene some positive rule of law or public policy.  

There is a shift away from the principle of following the donative intent of the maker of the trust and a requirement that a trust and its terms be for the benefit of the beneficiaries.  In contrast to our genesis of our historic trust law, the Restatement Third of Trusts is developing a preference for ending dead hand control over trusts. 

The authority for this shift is coming from the Uniform Trust Code and it is a push from deferring to settlor's intent to favoring the beneficiaries.  

While the statutes in Wyoming still favor the intent of the maker of the trust, trust provisions more and more are viewed through the lens of whether the trust and its provisions are beneficial to the beneficiary.   

The implication of the shift is that the courts have the ability to modify the trust if the terms do not benefit the beneficiaries.  

The direction of legislation in Wyoming regarding the extent of the benefit of a trust to beneficiaries is:   that the trust and its terms be for the benefit of its beneficiaries as their interests are defined under the terms of trust.  

The definition of a beneficiary in Wyoming was changed by its legislature in 2013.  The definition now is a cascading one, which provides what disclosure the beneficiary is entitled to, the control of the maker of the trust and what distributions of income or principal from the trust are required. 

Working with a trust law professional is the best way to ensure that your trust provisions, or any trust you make, has the outcome you desire for you, as the maker of the trust, and for your beneficiaries.  Please call me at 307.200.1914 for a consultation.  

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