Planning for Life

Which Spouse is the "Spouse" in the Trust?

Posted by Harry S. Margolis on March 23, 2021

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By Harry S. Margolis

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A recent Texas case, Osche v. Osche, shows the benefit of using names when drafting rather than terms such as "spouse." In 2008, Amanda Hurst Ochse created an irrevocable trust for the benefit of her son, William W. Ochse III, his children, and his "spouse." For almost 30 years, he had been married to Cynthia Cadwallader Ochse. However, they got divorced in 2012 and in 2015, William married Carol Osche.

Three years later, the children brought suit against their father and Cynthia intervened arguing that "primary beneficiary's spouse" and "son's spouse" referred to her since she was William's spouse when the trust was created. Carol also intervened arguing that those terms now refer to her since she is now William's spouse.

"Spouse" Means Spouse When Trust Was Drafted

The trial court agreed with Cynthia, finding:

The terms "spouse," "primary beneficiary's spouse," and "son's spouse" referenced in the Trust Agreement Establishing the William W. Ochse III Family 2008 Trust are unambiguous and specifically mean Cynthia Cadwallader Ochse, to whom William W. Ochse, III, was married at the time the trust instrument was established and does not mean any subsequent spouse of William W. Ochse, III, including but not limited to Carol Dicker Ochse.

Rules of Construction

On appeal, the Texas Appellate Court first describes the rules of construction for wills and trusts:

We harmonize all provisions and construe the instrument to give effect to all provisions so that no provision is rendered meaningless. When, as here, the language is unambiguous and expresses the grantor's intent, we need not construe the instrument because it speaks for itself. Thus, we do not focus on what the grantor intended to write but the meaning of the words she actually used. [Cites omitted.]

Yet, the Court then does read the trust language to put the grantor's intent into effect:

Using the above rules of construction, we must determine Amanda's intent, in 2008, when she executed the Trust for the benefit of her son's "spouse." At the time the Trust was executed, Amanda's son was married to Cynthia and had been married to her for approximately thirty years. Both parties agree that, at the time the Trust was executed, the term "spouse" unambiguously referred to Cynthia.

After considering the arguments of both sides, the Court ultimately concludes that Amanda did not contemplate William and Cynthia getting divorced and William marrying a new spouse, that she intended Cynthia, who she had known for decades, to be the beneficiary of the trust.

But What Did Amanda Really Intend?

While the Court states that its decision is based solely on its interpretation of the words of the trust, it's clearly influenced by its knowledge of William and Cynthia's long-term marriage. Unfortunately, Amanda does not appear to be around today to testify as to her intention. While she undoubtedly had Cynthia in mind when she created the trust, we have no idea what she would have said if she were asked whether Cynthia should continue as a beneficiary should she and William divorce.

This raises a problem for those drafting trusts. Clearly, in this case, it would have been better had the drafting attorney and Amanda discussed what she would want to happen in the event of William and Carolyn's divorce, but how many contingency trails must the drafting attorney and client follow to the end? Fortunately, at least from this point of view, most parents do not include their children's spouses in their estate plans.

We are led to assume that Amanda has passed away, but we do not know whether she died before or after William and Cynthia got divorced and William married Carol. One wonders whether the Court would have come to the same conclusion were Amanda's trust revocable and she died after the remarriage. While the date of her signing the trust would have been the same, the trust would not have become irrevocable until her death. If that were the case, could Carol successfully argue that the meaning of the term "spouse" should be set at the point the trust becomes irrevocable rather than when it's signed?

 

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Topics: irrevocable trust, rules of construction

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