Reed: Which spouse gets the benefit?

Sandra W. Reed
Special to the Reporter

Lewis established an irrevocable trust in which he named “his son’s spouse” as a beneficiary. At the time Clark, the son, was married to Vivian. For the next five years, Lewis, as trustee of the trust, annually distributed funds to Vivian. Shortly after Lewis’ death, Clark and Vivian divorced and Clark married Sophia.

As successor trustee, Clark distributed the benefits that had previously been designated for Vivian to Sophia. Vivian filed suit claiming these funds were intended for her. Who gets the distributions?

Sandra Reed

Did “son’s spouse” mean a status or a particular person?

Last year in the case, Ochse v. Ochse, No. 04-20-00035-CV, 2020 WL 6749044 (Tex. App. — San Antonio Nov. 18, 2020, pet. filed), the trial court found that the person who created the trust meant to benefit the ex-spouse, that is, his daughter-in-law at the time the trust was established. The appellate court affirmed this decision.

Would length of first marriage make a difference?

In that case, the son had been married to the first spouse for thirty years, which may have contributed to the court’s decision. Clark had been married to Vivian for only seven years. Would that make a difference to a court in the dispute between Vivian and Sophia? We don’t know whether a court would follow the decision made in Ochse v. Ochse in a marriage of a shorter term.

Would it make a difference if Lewis were alive and able to reveal what he intended? Perhaps, but not necessarily. The court in Ochse v. Ochse found that the term “son’s spouse” unambiguously meant the spouse at the time the trust was created. When a term is found to be unambiguous, no evidence can question its meaning. So, Lewis would not have been allowed to testify to his intention.

The lesson from the story

It is dangerous to name a beneficiary by relationship or status rather than by name because the relationship or status may change from time to time. To avoid confusion always state the name if a particular person is intended.

Sandra W. Reed practices, Elder Law in Somervell County, which includes handling probating of estates, drafting of wills, trusts, powers of attorney and deeds as well as estate and Medicaid planning.  She lives on beautiful Chalk Mountain and can be reached at 254.797.0211; 817.946.2809 or at sreed@kbzlaw.com.