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Factual Background:

Decedent created both a Revocable Trust and an Insurance Trust. The Revocable Trust named decedent’s brother, James Wild, as trustee and directed Trustee Wild to distribute the residue equally to two charitable remainder annuity trusts (CRATs).  Trustee Wild was the lifetime beneficiary of both CRATs, with two different colleges each being the remainder beneficiary of one.  The Revocable Trust gave Trustee Wild discretionary authority to pay federal and estate taxes owed as a result of decedent’s death with such payment being charged before funding the CRATs.  It further specified if such charges were taken, they were “without reimbursement from Grantor’s Personal Representative, from any beneficiary of insurance from Grantor’s life, or any other person.”

The Insurance Trust, which was irrevocable, made a provision for “Outright Gifts” that provided: “the Trustee shall distribute, outright and free of trust, to each person who is determined under Missouri law to be ultimately responsible for any federal estate tax, state estate or inheritance tax or any other death tax as a result of Grantor’s death, an amount equal to such death taxes for which such person is determined by the Trustee to be responsible.” The next paragraph provided that if any funds remained after paying the death taxes, they are to be held in trust to benefit Trustee Wild and then distributed to the then-living descendents of Virginia Cunningham.

After decedent passed away, Trustee Wild disclaimed any personal interest in distributions from the Insurance Trust.  U.S. Bank, upon becoming the second successor trustee of Insurance Trust, filed suit to seek a declaration as to how funds should be distributed.  The Cunninghams and the two colleges all filed cross-motions for judgment on the pleadings.

Jasper County Circuit Court, J. Mouton, Held:

This trial court entered a judgment that only the Cunninghams were entitled to any distribution from the Insurance Trust.          

Court of Appeals, J. Lynch, Held:

Reversed and Remanded.  This Court found the trial court misapplied the law and the judgment was not in accordance with the grantor’s stated intent for the Insurance Trust.

Cunninghams made two arguments.  First, they tried to argue that Trustee Wild was specially excluded from receiving a distribution from the Insurance Trust because that would constitute a “reimbursement”, which was specially precluded by the language in the Revocable Trust.  The Court found this argument failed because the words must be given their plain and ordinary meaning.  The words “reimbursement” used in the Revocable Trust and “gift” used in the Insurance Trust were specifically chosen by the grantor to be different, suggesting the grantor intended the two different words to have two distinct meanings.  Therefore, nothing in the Revocable Trust language prevented Trustee Wild from receiving a gift from the Insurance Trust.

The Cunninghams’ second argument was that the Revocable Trust and Insurance Trust were inconsistent with each other.  “The paramount rule in construing a trust is that the intent of the grantor is supreme.”  Where language is clear and unambiguous as to grantor’s intent, the court must give effect to that intent.  The language of the Insurance Trust explicitly stated that Decedent’s intent in establishing and funding the Insurance Trust was so that any person who received a gift, devise, bequest or other property as the result of grantor’s death received it without being burdened by the death taxes.  The intent of the grantor in creating the Insurance Trust was clear—she wanted any and every beneficiary free of death-tax burdens.  Nothing in the Revocable Trust was inconsistent with this.  Therefore, the trial court, in giving effect to grantor’s intent, should have ordered distributions for all beneficiaries, including but not limited to, the Cunninghams.