## Facts

- A 1947 will created a testamentary trust paying income to specified life beneficiaries, including the petitioner.
- On the death of the last income beneficiary, the trust was to terminate and the remainder was to be distributed equally to the petitioner’s children (or their descendants) per stirpes.
- One child, a disabled adult, lived in a state residential facility and received Medicaid and Social Security, both subject to income and resource limits.
- If the disabled child survived the life-income beneficiaries, his remainder share would be distributed to him outright, likely impairing his eligibility for means-tested benefits.
- The petitioner and other beneficiaries agreed to a proposed modification providing that, as to the disabled child’s share, the trust would continue after termination and be administered to supplement public assistance and avoid disqualification.
- The petitioner sought court approval of the agreement on the disabled child’s behalf; no guardian or conservator had been appointed for him.
- The trial court dismissed the petition.

## Issues

1. Whether ORS 128.135(2)(c) authorizes judicial approval of an agreement that substantively modifies a testamentary trust’s dispositive terms.
2. Whether common-law deviation (Restatement (Second) of Trusts § 167) permits converting an outright remainder distribution into a continuing discretionary arrangement to preserve a disabled beneficiary’s public-assistance eligibility based on unanticipated circumstances.

## Decision

- The Court of Appeals affirmed the dismissal of the petition.
- ORS 128.135(2)(c) was held not to authorize a substantive modification of the trust’s dispositive plan.
- Common-law deviation was held unavailable because the proposed change would fundamentally depart from the settlor’s expressed intent to distribute the remainder outright at termination.
- The court declined to infer that the settlor would have altered the dispositive scheme to qualify a descendant for public benefits.

## Legal Principles

- Statutory authority to direct or permit trustee conduct under ORS 128.135(2)(c) is construed as addressing trust administration, not rewriting dispositive provisions.
- Deviation under Restatement (Second) of Trusts § 167 allows departure from trust terms only when necessary to carry out the settlor’s purpose in light of circumstances not anticipated by the settlor; it does not permit fundamental changes to beneficial interests absent a showing tied to the settlor’s intent.
- Preserving a beneficiary’s eligibility for means-tested public benefits, standing alone, is not a sufficient basis to convert an outright remainder into a continuing trust arrangement contrary to the settlor’s distribution terms.

## Conclusion

The court refused to approve an agreed modification that would continue a testamentary trust for a disabled remainderman to protect public-benefits eligibility, holding that neither ORS 128.135(2)(c) nor common-law deviation permits a court to substitute a new dispositive scheme for the settlor’s expressed plan of outright distribution at trust termination.


In re Trust of Stuchell (In re Harrell), 801 P.2d 852 (Or. Ct. App. 1990)