Drafting trusts that include broad invasion powers.

• Author: Tiernan, Peter B.
• Position: Real Property, Probate and Trust Law

From time to time a client might want to include an invasion standard in his or her trust that is broader in scope that the typical "health, support, education or maintenance" provision. In light of the enactment of F.S. [section] 737.402(4)(a), if the beneficiary is named as a trustee, under certain circumstances he or she is not allowed to exercise these types of powers. However, broad invasion powers can still be exercised if what is involved is a marital trust or if an independent party is chosen to serve as trustee. Therefore, these standards are frequently found in many types of trusts.

This article will discuss some of the issues that should be considered whenever a broad invasion standard is used and will provide tips on how to draft the invasion provision to avoid misunderstandings and to achieve maximum effect.

What Does Your Client Want to Achieve?

In dealing with broad invasion standards, you must start from the premise established by case law that terms used in a trust are to be given their ordinary and usual meaning, unless some other meaning is clearly implied in the trust instrument. (1) It therefore is helpful to have a basic understanding of the type of distributions permissible under some of the most commonly used broad invasion standards.

* Simple Additional Pleasures and Luxuries

In many instances, all the client wants is to provide the trustee the ability to distribute to the beneficiary some additional small amounts from the trust that are not authorized under the typical "health, support, maintenance, and education" provision. The invasion power that is most likely chosen to accomplish this result is the "comfort" standard. This term has been defined as "something more than maintenance but something less than welfare." (2) One court stated, "Comfort embraces a variety of things, it is not limited solely to the necessities of life but may include things which bring ease, contentment or enjoyment." (3) One example of a permissible distribution pursuant to this term is payments to allow beneficiaries to quit their jobs so as to experience comfort in their lives. (4)

Most courts would probably decide that the term "comfort" has at most only minor subjective connotations, and that what is envisioned by this term is primarily the beneficiary's physical comfort. (5) Permitting a trustee to make distributions for a beneficiary's "comfort" should merely allow the trustee to make those distributions that provide additional simple luxuries which lead to the ease, contentment, and enjoyment for the beneficiary such as an extra vacation (which might not be permitted under a support standard), the housemaid twice a week, the first class plane ticket as opposed to tourist, and a country club membership. Depending upon the beneficiary's station of life, such distributions would not be authorized under a standard health, support, maintenance, and education provision.

Based on the usual and common meaning given to the term "comfort," distributions that would augment a beneficiary's estate should not be permissible. (6) Consequently, if a beneficiary is in need of housing, a trustee would not be able to purchase a house in the beneficiary's name as he might be able to do under either a "welfare" or "best interests" standard. However, there is nothing that prevents the trustee from buying the house in the trust's name and allowing the beneficiary to live rent-free, thereby providing for the beneficiary's comfort.

* More Substantial Distributions There will be instances in which a client will want to provide the trustee with the authority to make more substantial distributions to the beneficiary than can be made under a "comfort" standard. In such a case the client might want to consider using either a "best interest" or a "welfare" standard either alone or in addition to a "comfort" standard.

"Best interests." The types of distributions to beneficiaries permissible under a "best interests" standard include "not only the relief of poverty and distress, but may well comprehend whatever aids to their welfare and advancement, and enables them to establish themselves in life." (7) Based on this interpretation, examples of possible permissible distributions would be education at a prestigious boarding school (in light of its possible role in enhancing the beneficiary's chances to obtain future education at a prestigious college), vocational training, or postgraduate education. Payment for expenses of postgraduate education is not usually authorized pursuant to a invasion provision for someone's "education." (8) But since postgraduate education is something that would aid in a beneficiary's advancement and establishment in life, it should be permissible under a "best interests' standard assuming, of course, that the beneficiary has some clear and obtainable goal other than being s professional student. Other possible examples would be a distribution to pay off the beneficiary's debts, a distribution to put a down payment on a house (or the whole purchase price of the house if the trust was substantial enough in size), or perhaps a distribution to terminate a trust although this is clearly a borderline distribution. (9)

Regarding the limits of this power at least one court has reasoned that the term "best interests" does not permit the trustee to make a distribution to the beneficiary to allow the making of gifts to reduce the estate. (10) The reasoning behind this court's decision was that the primary purpose as indicated by the trust instrument, as a whole, was to provide for the surviving spouse and therefore the trustee had a duty to conserve corpus for the trustee's future protection and security. (11) Another reason the court could have used to deny the request was that the trustee must only be concerned with the beneficiary's best interests, and that permitting the beneficiary to use trust assets to make gifts to her children is something that would be in her children's best interests, not the beneficiary's. Permissible distributions under a "best interests" standard are those solely for the beneficiary's best interests and no one else's. Therefore, any aid or assistance to others (except possibly distributions to support the beneficiary's dependents (12)) should not be permitted pursuant to this standard.

"Welfare." With reference to the type of permissible purposes for which distributions can be made under a "welfare" standard, as previously indicated, "comfort" is more than "maintenance," and "welfare" is more than "comfort." (13) U.S. v. Powell, 307 F. 2d 821, 827 (1962), in citing Webster' s Dictionary, defined "welfare" as "the state or condition in regard to well-being; especially condition of health, happiness, prosperity or the like." In Estate of Albert E. Nettelton v. Commissioner, 4 T.C. 987 (1945), the Tax Court stated, "The term 'welfare' has a broad connotation and may denote a condition of happiness and prosperity." Interestingly, there are very few cases that set forth examples of actual distributions permissible under a "welfare" standard. One of the few examples of the type of distributions found to be permissible by a court pursuant to this standard was a distribution to purchase a large country estate for the beneficiary. (14)

There are a number of other cases in which it has been found that the term "welfare" is, in certain cases, synonymous with the term "happiness." (15) This is significant because a term like "happiness" permit distributions for almost any conceivable purpose, so long as the distributee is made "happy" by the distribution. Consequently, if it is found that the trustor intended to give this term its broadest definition, then the trustee could make the same type of distributions as he could make under a "happiness" standard, as will be explained below.

Black's Law Dictionary defines "welfare" as "well-doing or well-being in any respect; the enjoyment of health and common blessings of life; exemption from any evil or calamity; prosperity; happiness." The above definition states that welfare means well-being "in any respect." This is also significant because it provides for a definition of welfare that includes not only the beneficiary's physical and financial well-being but, possibly, mental and emotional well-being as well. Such a definition arguably permits distributions to the beneficiary to assist members of the beneficiary's family (in addition to those members of the family who are dependant upon the beneficiary (16)) and others, assuming that the trustee believes that such distributions would promote the beneficiary's emotional welfare, and also assuming that the size of the trust is adequate to provide these gifts and still provide for the beneficiary's future welfare. (17)

If adjectives are used to modify the term "welfare," this could affect this term's interpretation. For instance, if the adjective "physical" is used, such an addition would be a limiting factor which would almost...