Can surviving trustees convey trust assets despite restrictions on changing beneficiaries? Perrenoud v. Harman Explained

In Perrenoud v. Harman, the Utah Court of Appeals addressed whether a surviving trustee could convey trust property despite an addendum stating that beneficiaries could not be changed after one settlor’s death. The court’s analysis provides important guidance on distinguishing between settlor powers and trustee powers in revocable trusts.

Background and Facts: Joseph and Rhoda Thurber created a revocable trust listing their children as beneficiaries. After Joseph died, Rhoda became sole trustee and conveyed the trust’s real property to her granddaughter. The trust contained an addendum stating “If one of the above listed should be deceased, the beneficiaries cannot be changed.” Joseph’s daughter and Rhoda’s other children sued, claiming Rhoda breached her fiduciary duty by converting trust assets for some beneficiaries’ exclusive benefit.

Key Legal Issues: The central question was whether the addendum’s restriction on changing beneficiaries limited Rhoda’s power as surviving trustee to convey trust property. Plaintiffs argued this language made beneficiaries’ interests vested and irrevocable upon execution, while defendants contended the surviving trustee retained full powers to manage and dispose of trust assets.

Court’s Analysis and Holding: Following In re Estate of West, the court distinguished between settlor capacity and trustee capacity. The court held that the addendum only limited the survivor’s power as a settlor from changing beneficiaries, but did not restrict her authority as trustee to sell or encumber trust assets. The trust’s express provisions allowing trustees to “amend or revoke” and dispose of property without beneficiary consent demonstrated the settlors intended a fully revocable trust during their lifetimes.

Practice Implications: This decision highlights the importance of precise drafting when limiting surviving trustees’ powers. Courts will construe ambiguous restrictions narrowly to preserve the revocable nature of inter vivos trusts. Practitioners should use explicit language directly limiting trustee authority rather than general language about beneficiary changes that may only affect settlor powers. The case also reinforces that beneficiaries of revocable trusts typically hold only contingent interests subject to divestiture until both settlors die.