Opinion
No. 5-669 / 05-0116
Filed November 9, 2005
Appeal from the Iowa District Court for Linn County, Amanda P. Potterfield, Judge.
A remainder beneficiary of a trust appeals a district court ruling treating distributions to him as advancements against his remainder interest. AFFIRMED.
Peter Riley of Tom Riley Law Firm, P.L.C., Cedar Rapids, for appellant.
Paul Morf and Jason M. Steffens of Simmons, Perrine, Albright Ellwood, P.L.C., Cedar Rapids, for appellee-U.S. Bank, N.A., Trustee.
Angela Davis, Cedar Rapids, appellee-beneficiary, pro se.
Robert Davis, Marion, appellee-beneficiary, pro se.
Considered by Huitink, P.J., and Hecht, and Vaitheswaran, JJ.
A remainder beneficiary of a trust appeals a district court ruling treating distributions to him as advancements against his remainder interest. We affirm.
I. Background Facts and Proceedings
This case arises out of two trusts created by the parents of Janet Coquillette Wray. Under the trust instruments, the trust was to be used for the benefit of Janet. On Janet's death, the trust assets were to be distributed to her living descendants. Janet's son Daniel was one of the descendants. Daniel's niece and nephew were the other two descendants.
While Janet was living, she authorized the trustee to disburse money to Daniel from the trusts. Daniel received a total of $122,000.
The trusts were eventually merged.
On Janet's death, the trustee applied for authority to partially distribute the trust assets to the three beneficiaries. The trustee proposed to reduce Daniel's share by the amount he received during Janet's life. Daniel objected, contending most of the disbursements made to him were monthly allowances rather than advancements against his remainder interest. The district court overruled his objection and granted the trustee's application. Daniel appealed, following the court's denial of his motion for enlargement of findings.
Daniel agrees $10,000 he received was an advancement.
II. Analysis
On appeal, Daniel's sole assertion is that the district court acted inequitably in treating most of the disbursements as advancements against his share of the trust assets. Reviewing the record de novo, we agree with the district court that Daniel "has presented no legal bases for his objections to the partial distribution of trust assets."
The powers and duties of a trustee are controlled by the trust instrument. 76 Am. Jur. 2d Trusts § 345, at 398 (2005); see also Restatement (Third) of Trusts § 49, at 242 (2003) ("Except as limited by law or public policy . . . the extent of the interest of a trust beneficiary depends upon the intention manifested by the settlor."). The trust documents governing this case unequivocally state the trust was "for the use and benefit of" Janet. The documents also state the descendants were entitled to trust assets only upon Janet's death. Therefore, Daniel had no entitlement to principal or income from the trust during Janet's lifetime. That he received funds while she was alive was purely a result of her beneficence. Given the language of the trust documents, Janet had no obligation to pay Daniel during her lifetime and no authority to have the trustee treat the payments as anything but advancements.
Even if Janet had such authority, it is clear from the record that she intended to treat the payments as advancements. As early as 1997, Janet's attorney advised the trustee as follows:
Janet's strong wish, based on my advice to her, was that any future financial support for Dan come directly from the S.E. Coquillette Trust and be treated as an advance with the understanding that there be corresponding distributions to [Daniel's nephew and niece] at the time of Janet's death to equalize any lifetime distributions made to Dan.
In 1998, the trustee communicated Janet's wishes to Daniel, stating that "[i]t is important for you to keep in mind that all distributions to you from this trust, including both this one time distribution as well as the monthly distributions will be credited against your share when it comes time to terminate the trust." The trustee reiterated this point in a 2002 letter to Daniel, stating, "It is important to also note that all distributions that you have received from the trust will be allocated against your share in the event you survive Janet."
If there was still doubt about Janet's intent or the trustee's decision to implement this intent, that doubt was dispelled by the trustee's 2003 report to the court. The report stated,
It is the intention of the Trustee, upon the death of the primary beneficiary of the Trust, to add these advancements to DANIEL WRAY back to the Trust to obtain an "augmented value" of the Trust, and to use this augmented Trust corpus to compute the shares which will be distributed to each remainder beneficiary of this Trust, reducing the distributions to DANIEL WRAY by such advancements.
Daniel made no objections to this report.
We conclude the district court acted equitably in overruling Daniel's objections to the trustee's application for partial disbursement of trust assets, and in allowing the trustee to offset the payments to Daniel against his remainder interest.