Reversal: Trust’s residual beneficiary not reasonably certain

The denial of a motion to intervene was reversed Tuesday after the Indiana Court of Appeals agreed with the would-be intervenor’s argument that the language of a trust did not define a residual beneficiary with reasonable certainty.

Before his death in 2018, Ollie Waid Jr. established a revocable living trust that passed on $10,000 each to several individuals and organizations, leaving the trust with a residue of $4.6 million. The terms of Waid’s trust stated that its trustee would “hold, distribute and pay the remaining principal and undistributed income in perpetuity; subject, however, to limitations imposed by law.” It further stated that “All the powers given by law and the provision[s] of the [T]rust may be exercised in the sole discretion of the Trustee without prior authority above or subsequent approval by any court.”

Steven Post was made successor over the trust and filed a petition to docket it with the DeKalb Superior Court upon Waid’s death. Post requested to docket the trust because he claimed there was “a lack of specific direction on the face of the Trust Agreement as to the intended purpose of the residuary share of the Trust Estate.” Post had been informed by Waid’s former attorney that Waid had intended for the trust’s residuary share to be distributed or for the benefit of tax-exempt charities, strictly for charitable purposes, and he sought the court’s determination on that issue.

Cheryl Barron Doll, who was set to receive $10,000 from the trust, moved to intervene, arguing trust’s residuary clause failed as a matter of law because it did not identify a beneficiary with reasonable certainty. Thus, she asserted, the trust’s residue would pass to her at least in part through intestate succession.

The trial court denied Doll’s motion to intervene, though it did find the residuary clause was ambiguous. But it also found that extrinsic evidence established that Waid’s intent in establishing the trust was for it to be a charitable trust as defined by Indiana law and that, as a charitable trust, the residuary clause lawfully empowered Post to distribute the residue to a charity or charities to be identified in his sole discretion.

Doll appealed the denial of her intervention motion, arguing the residuary clause – the only provision left for Post to apply – unambiguously failed to identify a beneficiary with reasonable certainty. The Indiana Court of Appeals agreed Monday in Cheryl Barron Doll v. Steven E. Post, Trustee, and Indiana Attorney General, 19A-TR-715.

“The residuary clause does not confer unfettered authority on the Trustee to distribute the residue ‘in the sole discretion of the Trustee,’” Judge Edward Najam wrote for the panel. “Rather, the residuary clause is circumscribed by the ‘limitations imposed by law.’ And, here, the limitation imposed by our Trust Code is the requirement that a settlor identify a beneficiary with reasonable certainty.”

In support of its decision, the appellate court noted Waid never identified an indefinite class for the trustee to select a beneficiary from. Instead, the residuary clause “simply directs the Trustee to do with the residue as he sees fit.” Further, in a footnote, the court rejected Post’s assertion that he was the ascertainable residuary beneficiary under the trust.

Additionally, the appellate court found Waid’s trust was not a charitable trust and that the cy pres doctrine did not apply to the trust’s residue.

“Again, the residuary clause here lacks any requirement that the residue ‘is to be applied to a particular charitable purpose’ and also lacks any manifestation that Waid had ‘a more general intention’ to devote the residue to charitable purposes,” Najam wrote. “… Moreover, the benevolent public purposes for which the Trust exists have already been fulfilled by the distributions to the specifically named charities in Article VII of the Trust.”

The appellate panel therefore reversed the denial of Doll’s motion to intervene that had been based on the trial court’s interpretation of the residuary clause and remanded with instructions to grant Doll’s motion and to direct Post to hold the residue of the trust for Waid’s estate.

“As Waid died intestate, the court is further instructed to direct the Trustee to distribute the residue to Waid’s heirs at law pursuant to our intestate succession statutes,” the panel concluded.