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Question:

Situation: Co-grantors created a revocable trust in Oregon with their son (A) as a successor trustee and beneficiary of a 70% share. The other beneficiary (B) is their son’s four-year-old child who will receive a 30% share. Their son’s wife (C) is the successor trustee to their son.

Questions: If A were to predecease one or both of the grantors and the grantors failed to amend the trust beneficiaries, would C, upon the passing of the grantors, inherit A’s 70% share under Oregon’s common trust law ORS 130.550 anti-lapse statute? Regarding this trust’s assets would 130.550 supersede A’s will and other legal documents outside the trust? Also if C were to inherit the 70% share under ORS 130.550 vs acquiring it as a named beneficiary in a trust amendment would C have to go thru probate or as trustee could she distribute it to herself?

Response:

Let me start by saying that I’m not an Oregon attorney. But I took a look at the statute and here’s how I read it:

1. If A were to predecease the trust grantors, his share of the trust would pass to B. C would inherit nothing.
2. This would supersede A’s will and other documents, for instance his own trust.
3. No probate would be required.

All of this said, most trusts do provide for the eventuality that a beneficiary dies before the trust terminates. In addition, some trusts give beneficiaries a power of appointment allowing them to direct where their share of the trust goes. These may be “plenary,” meaning that the individual can appointment their share of the trust to anyone, or “limited,” restricting the power to certain beneficiaries, for instance, to lineal descendants and spouses. So, if A has a power of appointment, he may be able to direct his share of the trust to C.

Finally, usually powers of appointment are exercised in the will of the person holding the power. These are known as “testamentary” powers of appointment. On the face of it, this should mean that A’s will would have to be probated. However, given that C is the successor trustee it’s unlikely that anyone would require her to go through that formality.

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