What Happens If I Create A Trust And My Trustee (Husband) Later Gifts Large Portions Of My Assets To Others Not Named In My Trust?

Just recently, this situation was addressed in court.  In summary, the case facts are as follows:

  • A Wife (Trustor) created a Trust Agreement in which the Trust Agreement named the Wife and her Husband as the Trustees of her Trust.  The Wife later died and her Husband became the sole Trustee and primary beneficiary of the Trust.
  • Her Husband later remarried.  After the Husband remarried, he withdrew $400,000.00 from the Trust’s estate to have a house built for his second wife and titled the house in the name of the second wife.
  • The Husband then died.

  • The Trust Agreement specifically authorized the Trustee (Husband) to use the assets of the Trust, “as he deemed necessary for his health and maintenance in reasonable comfort.”
  • The Trust Agreement further stated that “upon the death of the Husband, the assets of the Trust would be divided among the four children of Husband and Wife.”

  1. The Court ruled that the Husband violated the Trust Agreement and breached his fiduciary duty to the four children.  The Trust Agreement gave the Trustee (Husband) the power “to make gifts of Trust assets to the Wife’s descendants” (the four children of Husband and Wife).
  2. The court added there was no other provision in the Trust Agreement that allowed the Husband to make gifts to anyone except the Wife’s descendants.
  3. The Court also ruled that provisions in Trust Agreements regarding the use of trust assets for support and maintenance of a beneficiary do not authorize distributions in order to enlarge a beneficiary’s personal estate or to enable making extraordinary gifts.
  4. The Husband violated this provision when he withdrew $400,000 from the Trust in order to build a house for his second wife.
  5. Furthermore, the “express grant of power” to make gifts to Wife’s descendants is an “implied denial to make gifts of assets to any other persons.  In other words, Husband was allowed to make gifts to the Wife’s descendants only and no one else.

**“Implied Denial” refers to those powers authorized by a document that, while not stated, seem to be implied by powers expressly stated.


Gwinn v Gwinn, 2016 IL App (2d) 150851 (August 15, 2-016).

 

 

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