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Irwin Union Bank & Tr. Co. v. Long - 160 Ind. App. 509, 312 N.E.2d 908 (1974)

Rule:

No title or interest in the thing vests in the donee of the power until he exercises the power. It is virtually an offer to him of the estate or fund, that he may receive or reject at will, and like any other offer to donate property to a person, no title can vest until he accepts the offer, nor can a court of equity compel him to accept the property or fund against his will, even for the benefit of creditors. If it should, it would be to convert the property of the person offering to make the donation to the payment of the debts of another person. Until accepted, the person to whom the offer is made has not, nor can he have, the slightest interest or title to the property. So the donee of the power only receives the naked power to make the property or fund his own. And when he exercises the power, he thereby consents to receive it, and the title thereby vests in him, although it may pass out of him eo instanti, to the appointee. 

Facts:

In 1957, appellee Victoria Long obtained a judgment in the amount of $ 15,000 against Philip W. Long; the judgment emanated from a divorce decree. Victoria sought satisfaction of the judgment by pursuing funds allegedly owed by her ex-husband in a trust set up by Laura Long, his mother. Victoria alleged that appellant Irwin Union Bank and Trust Company (Union Bank) was indebted to her ex-husband as the result of its position as trustee. The trial court ordered that any income, property, or profits, which were owed to Philip and not exempt from execution, should be applied to the divorce judgment. Thereafter, the trial court ordered a writ of execution after finding that four percent of the trust corpus of the trust created by Laura that benefited Philip was not exempt from execution and could be levied upon by Victoria. Union Bank, as trustee, filed its motion to set aside the writ of execution, but the motion was overruled by the trial court.

Issue:

Did the trial court err in allowing execution on the four percent of the trust corpus?

Answer:

Yes

Conclusion:

The Court of Appeals reversed and remanded the order from the trial court that levied a writ of execution upon a trust in satisfaction of a judgment obtained by the ex-wife. The Court held that an examination of the pertinent parts of the trust created by the ex-husband's mother indicated that the power given to the ex-husband fell under the definition of power of appointment. The Court held that the ex-husband might have exercised the power that had been delegated to him to distribute property not his own, but that he had no control over the trust corpus until he exercised his power of appointment and gave notice to the trustee that he wished to receive his share of the trust corpus. The Court held that until such exercise was made, the trustee had the absolute control and benefit of the trust corpus within the terms of the trust instrument; as a result, the ex-wife was in no position to either force the exercise of the power or to reach the corpus. 

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