## Facts

- A family trust held approximately 886 acres of Kentucky real property; the settlor’s widow held a lifetime income interest, and the remainder was divided into shares for the settlor’s three children, including Patricia Headley Green.
- Each child received a special testamentary power of appointment over that child’s share, exercisable only by will among the child’s surviving issue; if unexercised, the share would pass per stirpes to the child’s children.
- After the settlor’s death, family members entered “Fayette agreements” partitioning the land into three parts and purporting to require Patricia to exercise her power of appointment in favor of her five children.
- Consistent with that arrangement, Patricia initially executed a will giving her son Jonathan Green one-fifth of her partitioned share outright.
- By 1986, Jonathan was insolvent; in January 1986 Patricia executed a new will revoking the prior will and naming Jonathan as trustee for his children rather than giving him an outright interest.
- Jonathan filed for Chapter 7 bankruptcy in September 1986.
- The Chapter 7 trustee sued, asserting Jonathan held a property interest created by the Fayette agreements and the earlier will, and that Patricia’s new will was a fraudulent transfer that diminished property reachable by Jonathan’s creditors.

## Issues

1. Whether the Fayette agreements and Patricia’s earlier will gave Jonathan a present, enforceable property interest in trust realty that became property of the bankruptcy estate.
2. Whether Patricia’s change in testamentary disposition constituted a “transfer of an interest of the debtor in property” avoidable as a fraudulent conveyance under bankruptcy law.

## Decision

- The Sixth Circuit affirmed summary judgment for Patricia.
- The court held Jonathan never possessed a property interest in the trust land includable in his bankruptcy estate.
- Because Jonathan had no estate property interest, Patricia’s execution of a new will did not transfer Jonathan’s property and could not be avoided as a fraudulent conveyance.

## Legal Principles

- A special testamentary power of appointment is a discretionary power exercisable at death by will within the donor’s limits; it does not give the donee or prospective appointees a present ownership interest in the trust corpus.
- Objects of a special testamentary power generally hold only an expectancy dependent on the donee’s future testamentary choice and the object’s survival, not a vested or enforceable property right.
- Agreements that purport to bind the donee to exercise a special testamentary power in a particular manner are ineffective where the donor’s intent and governing law treat the power as nonassignable and noncontractible.
- Fraudulent-transfer avoidance requires a transfer of an interest of the debtor in property; altering a third party’s testamentary plan, without divesting the debtor of a legally enforceable property interest, does not satisfy that requirement.

## Conclusion

The court concluded that the Fayette agreements and an earlier will did not convert Jonathan’s expectancy under his mother’s special testamentary power of appointment into a property right for bankruptcy purposes; therefore, the mother’s later will changing Jonathan’s prospective share was not an avoidable fraudulent transfer.


In re Green, 986 F.2d 145 (6th Cir. 1993)