To begin, choose from these candidates for the all-world spendthrift hall of fame:

  • Imelda Marcos.
  • Every Congress since you and I were little babies.
  • Any MLB team that would trade for Giancarlo Stanton.
  • All Power Five football schools not named Vanderbilt.
  • The eventual winner of the Amazon HQ2 sweepstakes.
  • Robert Baratheon, Lord of the Seven Kingdoms.

In Bradley v. Shaffer, Darrell, a beneficiary of a mineral trust established by his grandparents, purported to convey to Bradley his mineral interests that were subject to the trust and any interest held in trust that he might acquire in the future. The trustees sued, alleging that Darrell had no authority to convey his beneficial interest. Bradley argued that an extension of the trust violated the Rule Against Perpetuities.  Spoiler: It didn’t.

A primer on Texas trust law … who owns what and other rules:

  • When a valid trust is created its beneficiaries become the owners of equitable or beneficial title to the trust properties and are considered the real owners.
  • The trustee is merely the depository of the bare legal title, vested with legal title and right of possession but holding it for the benefit of the beneficiaries.
  • A beneficiary who has capacity to transfer property has the power to transfer his equitable interest unless restricted by the terms of the trust.
  • A spendthrift trust is one in which the beneficiary is prohibited from anticipating or assigning his interest in or income from the trust estate. These are by settlors who want to protect beneficiaries from themselves. Resentful beneficiaries might see it as mean settlors controlling them from beyond the grave.
  • Under the Rule Against Perpetuities a trust interest is not good unless it must vest, if at all, not later than 21 years after some life in being at the time of the creation of the interest plus a period of gestation.

The trust was for a term of 20 years and had a spendthrift provision. It would have expired on June 23, 2013 if not extended but was extended for another 20 years.

Bradley asserted that the trust terminated on June 23, 2013, and title passed from the trust to Darrell then. Alternatively, title passed to Bradley under the doctrine of after-acquired title. His point was that the extension provision of the trust violated the Rule Against Perpetuities because when it was created in 1993 it could have extended beyond a life in being plus 21 years if it were extended.

The Rule is about vesting, not duration

The flaw in Bradley’s argument was that it focused on the duration of the trust rather than the vesting of the beneficial interests. Duration was not the relevant inquiry. The trust immediately vested in the initial beneficiaries at the time the trust came into existence.

This is not a case where property was taken out of commerce for a class of beneficiaries, the membership of which will not be known for a period of time in excess of the Rule. The extension only affected the trust’s duration and not the vesting of interests in the trust.

The after-acquired title argument failed because a beneficiary’s attempted transfer of his interest under a spendthrift trust is generally void.

Now, the unchurchy Christmas stuff.