5. [§ 246] Termination by Operation of Law.

, 13 Witkin, Summary 11th Trusts § 246 (2021)

13 Witkin, Summary 11th Trusts § 246 (2021)

Witkin | May 2021 Update

Summary of California Law, Eleventh Edition

B. E. Witkin and Publisher’s Editorial Staff

Chapter XX. Trusts

VI. Duration, Modification, and Termination

C. Revocation and Modification of Irrevocable Trust.

5. [§ 246] Termination by Operation of Law.

Correlation Table | Tables and Index

(1) In General. A trust terminates when any of the following occurs:

(a) The term of the trust expires. (Prob.C. 15407(a)(1).) (See Rest.3d, Trusts § 61; Estate of Hanson (1911) 159 C. 401, 405,
114 P. 810; Scott 5th, § 33.1; Bogert § 996.)

(b) The trust purpose is fulfilled. (Prob.C. 15407(a)(2).) (See Ball v. Mann (1948) 88 C.A.2d 695, 699, 199 P.2d 706 [trust for
benefit of minor becomes passive and terminates by operation of law when child reaches age of majority].)

(c) The trust purpose becomes unlawful. (Prob.C. 15407(a)(3).)

(d) The trust purpose becomes impossible to fulfill. (Prob.C. 15407(a)(4).) (See Rest.3d, Trusts § 61; Scott 5th, § 33.2; Bogert
§ 1002.)

(e) The trust is revoked. (Prob.C. 15407(a)(5).) (On revocation, see supra, § 226 et seq.)

(2) Effect of Settlor's Subsequent Marriage. Unlike a will, a trust in favor of a third person is not terminated or otherwise affected
by the subsequent marriage of the settlor. (Bank of America v. Hazelbud (1937) 21 C.A.2d 109, 115, 68 P.2d 385.)

(3) Merger. A trust also terminates where there is a merger of the legal title and equitable interest in one person, unless inequitable
results would follow. (Rest.3d, Trusts § 69; see Estate of Washburn (1910) 11 C.A. 735, 746, 106 P. 415; People v. Long Beach
(1962) 200 C.A.2d 609, 615, 19 C.R. 585; Scott 5th, § 34.5; Bogert § 1003; 7 A.L.R.4th 621 [merger where sole trustees are
sole beneficiaries].) (See Weinberger v. Morris (2010) 188 C.A.4th 1016, 1022, 115 C.R.3d 860 [because trust contemplated
ongoing management until final distribution of assets to then-living beneficiary and provided for contingent beneficiary, there
was no merger when sole beneficiary became sole trustee].)

In Ammco Ornamental Iron v. Wing (1994) 26 C.A.4th 409, 418, 419, 31 C.R.2d 564, defendant, plaintiff's judgment debtor,
was the income beneficiary and successor trustee of a spendthrift trust, which gave defendant a special testamentary power of
appointment over the trust corpus, and provided for a gift in default of appointment to defendant's issue. In this action to satisfy
the judgment from the assets of the trust, the trial judge held that the legal title and equitable interest merged when defendant
became the sole trustee on the settlor's death. Held, there was no merger.

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5. [§ 246] Termination by Operation of Law., 13 Witkin, Summary 11th Trusts § 246 (2021)

(a) Although a trust terminates and the legal title and equitable interest merge when the sole trustee is the sole beneficiary, the
remainder interest in the trustee's children prevented merger. “A remainder interest is vested, subject to complete divestment,
when the remainderman is in existence and ascertained and his interest is not subject to a condition precedent, although his
right to possession or enjoyment on the expiration of the prior interests is subject to termination by reason, e.g., of a power
of appointment.” (26 C.A.4th 418.) Under C.C. 781, a future interest, though subject to complete divestment, is a valid vested
interest, and under C.C. 740, a future interest is not invalid even if a subsequent event may completely divest a beneficiary.
Thus, the children are additional beneficiaries, and their interests may not be disregarded in applying the merger doctrine. (26
C.A.4th 419.)

(b) Nor is the trustee the sole beneficiary merely because he has the power to invade the principal for his own support, health, and
maintenance. A trustee-beneficiary with discretion to invade the principal has a fiduciary obligation to remainder beneficiaries
“to confine his demands within reasonable limits,” and the better course to reduce the risk that a trustee-beneficiary will unduly
favor himself is to appoint a cotrustee. (26 C.A.4th 419.) Here, although defendant became the sole trustee on the settlor's death,
he declined to serve and a successor named in the trust became trustee. Thus, there was no basis for treating him as the sole
beneficiary. (26 C.A.4th 420.)

West's Key Number Digest,Trusts 61(1)

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