Tait v. Cmty. First Tr. Co. - 2012 Ark. 455, 425 S.W.3d 684

Rule:

The greater weight of authority holds that the interest of a beneficiary to an inter vivos trust does not lapse when the beneficiary predeceases the settlor. This rule is based on the principle that the interests of such beneficiaries vests when the trust is created and thus does not lapse with the death of the beneficiary.

Facts:

The settlors were husband and wife; they had no children together. The trust provided that upon the death of the second settlor, shares would go to various people, including the husband's two stepsons and his nieces and nephews. The wife died first; prior to the husband's death, his two stepsons and one niece died. The descendants contended that they were entitled to the stepsons' and niece's shares. The circuit court ruled for the trustee, and the descendants appealed.

Issue:

Did the interests of the beneficiaries, who predeceased the surviving settlor of an inter vivos trust, lapse upon the death of the beneficiaries? 

Answer:

No.

Conclusion:

The court reversed and remanded for further proceedings. The court held that the interest of the beneficiaries to the inter vivos trust vested at the time the trust was created, and thus the beneficial interest did not lapse when the beneficiaries predeceased the settlor. To the extent Farr v. Henson, 79 Ark. App. 114, 84 S.W.3d 871 (2002), held to the contrary, it was overruled.