## Facts

- Donald O’Riley created a trust naming U.S. Bank, N.A. as trustee.
- The trust provided that, upon Donald’s death, the trust estate would be divided into a marital trust and a nonmarital trust.
- For the nonmarital trust, the trust agreement gave U.S. Bank “absolute discretion” to periodically distribute as much net income as it deemed advisable to Donald’s widow, Arlene O’Riley, for her care, support, maintenance, and welfare, making her the preferred beneficiary.
- Only if net income remained after paying Arlene could U.S. Bank, in its absolute discretion, distribute as much of the remaining income to Donald’s sons, Terrance and Gerald O’Riley, as it deemed advisable for their care, support, maintenance, education, and welfare.
- After Donald’s death, Arlene submitted annual requests for income distributions and provided financial records reflecting her income and expenses.
- Arlene’s claimed expenses were consistent with the lifestyle she and Donald maintained during Donald’s lifetime.
- U.S. Bank distributed the nonmarital trust’s net income to Arlene largely in accordance with her requests.
- Terrance made requests for distributions from the nonmarital trust; U.S. Bank denied most of those requests and made only minimal distributions to him.
- Terrance and Gerald sued U.S. Bank, alleging it abused its discretionary authority and breached fiduciary duties by making unreasonable distributions that failed to “balance” the beneficiaries’ respective needs.
- After a bench trial, the circuit court entered judgment for U.S. Bank. Terrance and Gerald appealed.

## Issues

1. Whether the trustee abused its “absolute discretion” and breached fiduciary duties by distributing all or nearly all nonmarital-trust net income to the preferred beneficiary (Arlene) and making minimal or no distributions to the sons.
2. Whether the trust required the trustee to “balance” Arlene’s needs against the sons’ requests despite language giving Arlene priority and limiting sons’ distributions to any income remaining after Arlene.
3. Whether the evidence required judicial intervention because the trustee acted arbitrarily, capriciously, or in bad faith in exercising its discretionary distribution authority.

## Decision

- The Missouri Court of Appeals, Western District, affirmed the judgment for U.S. Bank.
- The court held that the trust instrument gave the trustee broad (though not unlimited) discretion and clearly established Arlene as the preferred income beneficiary of the nonmarital trust.
- The trustee did not abuse its discretion by distributing all or nearly all net income to Arlene where her documented expenses reflected the standard of living she had during Donald’s life and the trust permitted distributions to the sons only from income remaining after Arlene’s distributions.
- The sons did not prove that the trustee’s decisions were arbitrary, capricious, or made in bad faith, and therefore the court would not substitute its judgment for the trustee’s discretionary decisionmaking.
- Because the trial court’s findings were supported by the record and not legally erroneous, the appellate court deferred to the trial court’s judgment.

## Legal Principles

- A trust is construed to carry out the settlor’s intent as expressed in the trust instrument, including any beneficiary priority the settlor created.
- Even when a trustee is granted “absolute discretion,” the trustee must still exercise that discretion in good faith and within the purposes and limits set by the trust.
- Courts will not interfere with a trustee’s discretionary distribution decisions unless the challenger proves the trustee acted arbitrarily, capriciously, dishonestly, or from an improper motive (i.e., abused discretion).
- A claim that a trustee should “balance” beneficiaries’ competing interests cannot override express trust terms that designate a preferred beneficiary and condition other beneficiaries’ distributions on remaining income.
- On appeal from a bench-tried case, the appellate court affirms unless the judgment lacks substantial evidence, is against the weight of the evidence, or erroneously declares or applies the law.

## Conclusion

The court affirmed judgment for the corporate trustee because the trust expressly made the widow the preferred income beneficiary and granted the trustee broad discretion to distribute net income to her; the sons, eligible only for any income remaining, failed to show that the trustee’s distribution pattern was arbitrary, capricious, or in bad faith, so judicial intervention was not warranted.


O'Riley v. U.S. Bank, N.A., 412 S.W.3d 400 (2013)