Industrial National Bank of Rhode Island v. Barrett

Brief Fact Summary. Bill in equity brought by Industrial National Bank and Aline C. Lathan (Plaintiffs), executors and trustees, under the will of Mary M. Tilley (Testator), for the construction of Testator’s will and determination of the form of her power of appointment.

Synopsis of Rule of Law. When an individual exercises a general power of appointment, he is at that time the practical owner of the property in issue for the purposes of the Rule Against Perpetuities because he can appoint to anyone of his choice as well as his own estate.

Facts. Testator’s husband died prior to Testator. Through Testator’s husband’s will, Testator received the property of her deceased husband in trust, held by Plaintiffs as trustees, with at least the quarterly income payable to Testator for life. In addition, Testator was entitled to request in writing any additional amounts of the trust corpus as she may need for her comfort and support without being held accountable to any remainderman or court. Testator also received a general power of appointment over the corpus of the trust at her death. Testator exercised this general power in her will and had the income of the trust payable to her granddaughters, and upon either of their deaths, to the granddaughter’s issue. Testator stated that the trust was to terminate twenty-one years after the death of the last survivor of the younger grandchild or issue of either grandchild living at her death. The matter is brought before the Court by plaintiffs to have the Testator’s will and instructi
ons there under interpreted.

Issue. When an individual exercises a general power of appointment, is he at that time the practical owner of the property in issue for the purposes of the Rule Against Perpetuities because he can appoint to anyone of his choice as well as to his own estate?

Held. Yes. When an individual exercises a general power of appointment, he is at that time the practical owner of the property in issue for the purposes of the Rule Against Perpetuities because he can appoint to anyone of his choice as well as his own estate. Not only does logic dictate this result, but so does the trend to obviate the technical harshness of the Rule Against Perpetuities in order to decide cases on the substance of things. The law does not aim to prohibit an estate from being tied up for the life of any one individual, but prohibits only restrain beyond the lives in being plus twenty-one years. Here Testator could create estates entirely independent from those created or controlled by the donor. Consequently, we hold that the trust created by Testator is valid.

Discussion. Modern courts have attempted to eliminate what this Court refers to as the “harshness” of the Rule Against Perpetuities by creatively construing the interests created when the Rule is at issue. The relation-back doctrine is used to determine the point at which the clock starts ticking for the Rule Against Perpetuities. The Court decides that when Testator exercised her power, she became the practical owner of the property, thereby avoiding the voiding effect of the Rule.