Cook v. Horn


PROCEDURE: Action against trustee under inter vivos to terminate trust. From a judgment of the Superior Court, Chatham County, sustaining a general demurrer to the petition, the plaintiffs appealed.

FACTS: Massee created a revocable trust to benefit his wife for her life, then his children for their lives, with the remainder to his grandchildren, each grandchild's share to be held in trust until reaching twenty-one, but Cook (P) claimed the trust violated the rule against perpetuities.

ISSUE: Did the trust violate the rule against perpetuities, when the settlor retained the right to revoke the trust during his lifetime?\

HOLDING: The Supreme Court, Wyatt, P. J., held that where settlor provided that trust should be divided into as many parts as he had children and that each child was to receive proceeds from his or her trust for and during his or her natural life and settlor then provided remainders to issue of his children upon death of such children, and settlor, during his lifetime, had an absolute right to revoke or terminate trust, to change beneficiaries in insurance policies which were payable to trust and to receive any and all benefits under policies, time from which it should be determined whether any of limitations in trust agreement were void for remoteness was date of settlor's death, and when so considered, none of limitations in trust violated rule against perpetuities, when all limitations would end and all interests vest within 21 years after death of settlor's children plus usual period of gestation.

ANALYSIS: When the settlor has reserved the right to revoke or destroy the trust estate, the question of whether interests are void for violation of the rule against perpetuities is determined by reference to the date of the settlor's death, not the execution of the trust. The rule against perpetuities is meant to prevent tying up property for an unreasonable amount of time and to prohibit unreasonable restraints on the alienation of property. If the settlor has the right to revoke the trust, however, the property is not tied up and there is no restraint on alienation. Massee had the right to terminate or modify the trust at any time during his lifetime. The time for determining whether any interest is void for remoteness begins to run at the time of Massee's death. When so construed, it is clear that all interests will vest within twenty-one years after the death of the settlor's children. Affirmed.