The Supreme Court of South Dakota interprets an irrevocable trust agreement to benefit the settlor’s brother only. The settlor never executed a valid testamentary instrument designating his children as beneficiaries, which the terms of the trust required. In the Matter of Michael J. Tharaldson Irrevocable Trust II (N.D., No. 20220182, January 5, 2023).
Before Michael J. Tharaldson passed away in 2017, he executed an irrevocable trust agreement in 2007 and another in 2011. The trustee, Bell Bank, merged the first trust with the second trust. At the time of his passing, Mr. Michael J. Tharaldson was unmarried. Three children survived him, including E.M., as well as his brother, Matthew Tharaldson. The district court found that Mr. Michael Tharaldson died intestate.
Asserting that Mr. Matthew Tharaldson was the trust’s sole beneficiary, in 2019, Bell Bank petitioned the court to name the trust beneficiaries and approve asset distribution. E.M. objected, claiming he and his siblings were beneficiaries under the first trust, which Bell Bank unlawfully merged with the second trust. After the court found that Matthew Tharaldson was the sole beneficiary, E.M. appealed.
On appeal, the court examines the written language in the trust to reveal the settlor’s intent. Rules of construction inform the analysis. Since E.M. concedes that he is not a beneficiary under the second trust, the court focuses on the first trust, which provides that the funds go to: “my descendants and my wife as I may appoint in a valid testamentary instrument that expressly refers to this special power of appointment.” The first trust also states that if the settlor does not exercise the appointment power, the trust’s contents go to his brother.
Agreeing that his father never executed a valid testamentary instrument appointing him as a beneficiary to the trust, E.M. argues the trust only required an additional testamentary designation for his father’s potential wife, not his children. E.M. points to the last antecedent rule, which states that a limiting clause should only apply to the directly preceding subject.
Bell Bank and the settlor’s brother argue that while the last antecedent rule does not apply to the language in the trust, the series qualifier rule does. In contrast to the last antecedent rule, the series qualifier rule holds that modifiers at the end of the series generally apply when the list is straightforward, meaning that Michael J. Tharaldson would have had to execute another testamentary document to leave the contents of his trust to his children.
Agreeing with the bank, the court holds that the special appointment provision applies to both Mr. Michael J. Tharaldson’s children and his hypothetical wife. When using the rules of construction, the court must not be rigid and consider the context. Here, the son’s interpretation would render the provision that the trust goes to the brother in lieu of a special appointment obsolete.
Because the trust states that the settlor must execute an additional valid testamentary instrument to leave the trust to his children and he died intestate, Matthew Tharaldson is the sole beneficiary.
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