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Stewart v. Merchs. Nat'l Bank - 3 Ill. App. 3d 337, 278 N.E.2d 10 (1972)

Rule:

The sole beneficiaries of a trust, created by themselves as settlors, may revoke the trust without the consent of the trustee, although they do not reserve a power of revocation.

Facts:

Appellant Thomas Stewart was struck by an automobile while riding his motorcycle to work. Serious damage to one eye occurred as well as other injuries. The trust in question was suggested to Stewart by his attorney following the settlement of a personal injury action wherein he represented Stewart. In the trust instrument, Stewart's attorney designated himself as the settlor and Stewart as the beneficiary. The primary purposes of the trust were twofold: to provide for the rehabilitation of Stewart from personal injuries suffered by him, and for regular payment of mortgage indebtedness. After only three years had elapsed from the date of its execution, Stewart filed a petition against appellees bank, trustees, and others, to revoke the special 10-year trust. The trial court held that Stewart could not revoke the trust because interests of minors and unborn heirs were involved. On appeal, Stewart argued that the trust was void as a matter of law inasmuch as the attorney acted as settlor without having full ownership of the trust property.

Issue:

1. Was the trust void as a matter of law?

2. Was the consent of the heirs required before revocation of the trust?

Answer:

1. No. 2. No.

Conclusion:

1. The Court held that as long as the settlor intelligently ratified the trust, it was not void for want of a competent settlor. Although some testimony arose in the proceedings below concerning the degree of appellant's understanding of the trust provisions, such facts have not entered into this appeal. Thus, the beneficiary of the trust was in fact the settlor of the trust, Stewart.

2. The Court  held that the trust had not created such an interest in the settlor's heirs that their consent was necessary for revocation because as the sole beneficiary of the trust, created by himself as settlor, Stewart could have revoked the trust without the consent of the trustee, even though the Stewart did not reserve a power of revocation. Under the rule of law that the "person who furnishes the consideration for the creation of a trust is the settlor, even though, in form, the trust is created by another," the Court found that the Stewart intended the trust to remain his property. Therefore, the consent of the heirs was not required for revocation.

 

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