Anti-lapse statutes and revocable trusts
Recently I was asked to research the question what exactly should happen with a portion of the residue of a decedent's revocable trust which the document said was to be distributed to a spouse whom he had later divorced. I was somewhat surprised to find a dearth of caselaw directly on point.
The particular situation arose in Oregon, where I used to live. A statute enacted in 2003 said provisions in a revocable trust benefiting a spouse were revoked by a subsequent divorce. The statute also said the trust was to be construed as though she had predeceased, but to me it seemed obvious this had to do with, for example, the vesting of remainders contingent on surviving the former spouse. In other words, what we had here was a revocation of a portion of the residuary disposition, not a lapse.
But if we had a lapse, the question would then be whether the anti-lapse statute would apply. By its terms that statute applies only to a will, not to a revocable trust. One or two courts in other states have applied an anti-lapse statute to a revocable trust by analogy, but the analogy is inapt, and here is why.
A will takes effect only at the testator's death. A transfer to a revocable trust immediately creates vested future interests, subject to defeasance by the act of revocation and/or by discretionary distributions to the settlor. A vested remainder, if not defeated, is inheritable.
Planners who have little or no formal background in the law of future interests are not used to thinking in this way, but at common law this logic is actually necessary, absent a statute, to validating the revocable trust as something other than a failed testamentary disposition. The Oregon supreme court crossed this threshold in 1922.
The Oregon courts continued to treat the lapse of a residuary bequest as creating a partial intestacy until enactment of an anti-lapse statute in 1973. But again, that statute by its terms applies only to a will. The 2003 trust statute made provision for the lapse of a nonresiduary gift, dumping it into the residue, but said nothing about the lapse of a residuary gift -- possibly because, as noted above, the common law already provides, in effect, that the gift simply descends to the heirs or legatees of the predeceased residuary beneficiary.
If the entire trust had been revoked, the corpus would revert to the settlor's estate. A testamentary pourover to the revoked trust would create a partial intestacy. My argument is the same result should apply to a partial revocation of a residuary disposition.
Recently I was asked to research the question what exactly should happen with a portion of the residue of a decedent's revocable trust which the document said was to be distributed to a spouse whom he had later divorced. I was somewhat surprised to find a dearth of caselaw directly on point.
The particular situation arose in Oregon, where I used to live. A statute enacted in 2003 said provisions in a revocable trust benefiting a spouse were revoked by a subsequent divorce. The statute also said the trust was to be construed as though she had predeceased, but to me it seemed obvious this had to do with, for example, the vesting of remainders contingent on surviving the former spouse. In other words, what we had here was a revocation of a portion of the residuary disposition, not a lapse.
But if we had a lapse, the question would then be whether the anti-lapse statute would apply. By its terms that statute applies only to a will, not to a revocable trust. One or two courts in other states have applied an anti-lapse statute to a revocable trust by analogy, but the analogy is inapt, and here is why.
A will takes effect only at the testator's death. A transfer to a revocable trust immediately creates vested future interests, subject to defeasance by the act of revocation and/or by discretionary distributions to the settlor. A vested remainder, if not defeated, is inheritable.
Planners who have little or no formal background in the law of future interests are not used to thinking in this way, but at common law this logic is actually necessary, absent a statute, to validating the revocable trust as something other than a failed testamentary disposition. The Oregon supreme court crossed this threshold in 1922.
The Oregon courts continued to treat the lapse of a residuary bequest as creating a partial intestacy until enactment of an anti-lapse statute in 1973. But again, that statute by its terms applies only to a will. The 2003 trust statute made provision for the lapse of a nonresiduary gift, dumping it into the residue, but said nothing about the lapse of a residuary gift -- possibly because, as noted above, the common law already provides, in effect, that the gift simply descends to the heirs or legatees of the predeceased residuary beneficiary.
If the entire trust had been revoked, the corpus would revert to the settlor's estate. A testamentary pourover to the revoked trust would create a partial intestacy. My argument is the same result should apply to a partial revocation of a residuary disposition.
| anti_lapse.pdf |