¶ 2401
Overview
Scope of the chapter. This chapter closes Part V, which deals with the duration of a trust and the people it serves. Chapters 22 and 23 asked how long a trust may last and how the generation-skipping transfer tax treats a trust that lasts a long time (see supra chs. 22–23). This chapter asks who the beneficiaries of such a trust are, how they are described, and on what terms they take. It also asks by what means the instrument excludes those the settlor does not wish to benefit. A trust designed to last for several generations will be administered for people the settlor never met. The words that describe them, and the standards that govern what they receive, are the part of the instrument that does most of the work over the life of the trust.
Four design questions. Every beneficiary provision answers four questions, whether or not the drafter addresses them. The first is membership: who is in the class? The words "children", "descendants", "issue" and "spouse" each carry default meanings that have changed over the last sixty years and are still changing, most recently in response to assisted reproduction and to the constitutional recognition of same-sex marriage. The second is division: when the class takes, in what shares? The third is entitlement: what standard governs distributions to a member of the class while the trust continues, and who applies it? The fourth is exclusion and condition: how does the settlor leave someone out, reward or discourage conduct, or make provision for a beneficiary whose circumstances call for a different kind of trust? The chapter takes the questions in that order.
Construction and design. Most of the law in this chapter consists of rules of construction. A rule of construction supplies the meaning of a term when the instrument does not. It yields to a contrary intention expressed in the instrument. The Uniform Probate Code's class-gift provisions apply "in accordance with the rules for intestate succession" unless the governing instrument says otherwise, and the state statutes discussed below are of the same kind. Alaska Stat. § 13.12.705(a); N.D. Cent. Code § 30.1-09.1-05(2). The planner therefore has a choice. The planner may accept the default meaning, which will change as the legislature changes it, or may define the term in the instrument, which fixes the meaning as of the drafting date. For a trust that will last a century, neither choice is free of risk. A fixed definition cannot anticipate a technology or a family form that does not yet exist. A default meaning may change in a direction the settlor would not have accepted. The usual solution, developed at ¶ 2490, is a definition that states the settlor's core intention and gives a trust director or protector a limited power to resolve cases the definition does not cover (see supra chs. 11–12).
Limits on design. The settlor's freedom to choose beneficiaries is wide but not unlimited. Chapter 3 examined the limits that public policy places on conditions that control a beneficiary's conduct, including the decisions in Shapira v. Union National Bank and In re Estate of Feinberg on religious conditions attached to marriage (see supra ¶ 370). This chapter returns to those limits only where they bear on drafting beneficiary provisions, at ¶¶ 2460–2470. Chapter 5 examined the irreducible core of trusteeship, including the rule that a trustee must exercise even an absolute discretion in good faith (see supra ch. 5). That rule shapes the distribution standards discussed at ¶ 2450. Spendthrift provisions, which protect a beneficiary's interest from creditors, are treated in chapter 36 (see infra ch. 36).