## Facts

- William J. Fowler and Annie R. Fowler created and funded the Fowler Family Trust (an inter vivos trust) in November 2000, consisting of William’s separate property, Annie’s separate property, and jointly owned property.
- The trustee could distribute income and principal to William and Annie during their lifetimes for their support; the trust became irrevocable upon the death of either settlor.
- On the death of the surviving settlor, the trust was to terminate and distribute:
  - William’s separate property and jointly owned property in equal shares to William’s two stepchildren (Dale Paschal Jones and Billy Ray Jones) and ten named nieces and nephews (including Tommy Dean Fry).
  - Annie’s separate property in equal shares to three of her children.
- Annie died in May 2001; William survived and died in January 2011.
- Dale (d. 2004) and Billy Ray (d. 2008) predeceased William and left descendants (the appellants); Tommy Dean Fry (d. 2009) predeceased William and died without issue.
- After William’s death, the trustee petitioned for construction to determine whether the shares of beneficiaries who predeceased William lapsed, excluding their descendants or estates.

## Issues

1. Whether a named remainder beneficiary’s interest in an inter vivos trust, payable at termination upon the surviving settlor’s death, lapses when the beneficiary predeceases the surviving settlor absent clear trust language requiring survival.
2. Whether such remainder interests are better characterized as vested (with possession postponed) rather than contingent on survival to the terminating event.

## Decision

- The Arkansas Supreme Court reversed the circuit court and remanded.
- The court held the named remainder beneficiaries’ interests did not lapse merely because they predeceased the surviving settlor.
- The court treated the remainder interests as vested (subject to divestment only if the instrument so provided), because the trust named specific beneficiaries, fixed shares, and did not condition gifts on survival.
- Descendants of Dale and Billy Ray were entitled to take their fathers’ shares absent trust language clearly cutting off that result.

## Legal Principles

- Trust interpretation centers on the settlor’s intent as expressed in the instrument; survival conditions must be stated with sufficient clarity to defeat a named beneficiary’s interest.
- In construing inter vivos trusts that function as will substitutes, courts favor early vesting and constructions that avoid partial failure of disposition, unless the instrument indicates a contrary plan.
- A remainder interest in an inter vivos trust may be vested even when enjoyment is deferred until the trust terminates; a beneficiary’s death before the terminating event does not, by itself, cause lapse when the trust names the beneficiary and fixes the share without a survivorship requirement.

## Conclusion

The court held that, absent clear survivorship language, named remainder interests in an inter vivos trust are presumed vested and therefore do not lapse solely because a beneficiary dies before the surviving settlor; the beneficiary’s descendants may succeed to the share on trust termination.


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