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If no interest passes to the alleged beneficiary before the death of the settlor, any intended inter vivos trusts are testamentary and hence invalid for failure to comply with the statute on wills.
This is an appeal from a decision of the Appellate Court, First District, which affirmed a decree of the circuit court of Cook County finding that certain declarations of trust executed by Albert B. Farkas and naming Richard J. Williams as beneficiary were invalid and that Regina Farkas and Victor Farkas, as coadministrators of the estate of said Albert B. Farkas, were the owners of the property referred to in said trust instruments, being certain shares of capital stock of Investors Mutual, Inc. Said coadministrators, herein referred to as plaintiffs, filed a complaint in the circuit court of Cook County for a declaratory decree and other relief against said Richard J. Williams and Investors Mutual, Inc., herein referred to as defendants. The plaintiffs asked the court to declare their legal rights, as coadministrators, in four stock certificates issued by Investors Mutual Inc. in the name of "Albert B. Farkas, as trustee for Richard J. Williams" and which were issued pursuant to written declarations of trust. The decree of the circuit court found that said declarations were testamentary in character, and not having been executed with the formalities of a will, were invalid, and directed that the stock be awarded to the plaintiffs as an asset of the estate of said Albert B. Farkas. Upon appeal to the Appellate Court, the decree was affirmed.
Did the trust instruments create valid inter vivos trusts effective to give the purported beneficiary, Williams, title to the stock in question after the death of the settlor-trustee, Farkas?
The court on appeal found that the inter vivos trust was valid, first, because Williams acquired an immediate, although undefined, interest in the trust at its creation. Next, the court found that Farkas’ retained powers were not so substantial as to invalidate the trust. The court so found because Farkas, as trustee, was required to act in the beneficiary's best interests, rather than his own. The court found that the power to revoke the trust similarly did not render it testamentary in character. The court held that each of the contingencies was merely a condition subsequent that could have defeated Williams’ interest but, because each went unexercised, vesting of equitable title in Williams was not prevented.