First National Bank of Bar Harbor v. Anthony
557 A.2d 957 (1989)

  • Anderson established a revocable inter vivios trust with First National. The interest in the trust was payable to Anderson (the settlor) for life, then to his wife until she died. What was left of the trust after they both died (aka the corpus, aka the remainder interest) was to be divided equally between their three children.
    • Out of the three children, one (John) predeceased Anderson, leaving three grandchildren.
  • Anderson died, and his will expressly left John’s children with nothing.
    • Anderson’s wife had predeceased him.
  • First National went to court and asked how they should split up the trust. The question was whether the share that was intended for John had lapsed.
  • The Trial Court found that the gift had lapsed and that the trust should be split amongst Anderson’s two surviving children. John’s children appealed.
    • The Trial Court found that the gifts to the children were not a class gift, because it went to named individuals, not just ‘all my children’.
    • The Trial Court found that the gift had lapsed because his interest did not vest until Anderson’s death, and John had predeceased his father.
      • The Trial Court declined to apply anti-lapse laws because those only applied to wills, and this was a non-probate transfer.
  • The Main Supreme Court vacated the judgment.
    • The Maine Supreme Court found that the remainder interest was a present, vested interest at the time of the creation of the inter vivos trust, the gift does not lapse and should be given to John’s heirs.
      • The Court noted that Anderson could have changed the trust’s beneficiaries but did not.
      • The Court noted that Anderson included a survival clause for his wife, but did not do so for his children.
    • Basically, the Maine Supreme Court said that in this case the children’s interests were vested, even though they were subject to defeasance or divestment if Anderson chose to amend or revoke the trust of chance his beneficiaries.
      • Therefore, John’s share became part of his estate as soon as the trust was signed, even though he wouldn’t get the money until Anderson died. That future interest was an asset that went to his heirs when he died.
      • This is true even though the trust said that, “on Anderson’s death the remainder shall vest.”
      • The term ‘defeasance’ means that it could be revoked with subsequent instrument, For example, Anderson could have written an amendment to the trust provisions to remove John’s share.
  • There are three types of future interest:
    • Vested:
      • The property is yours now, even though you may not possess it until some time in the future.
    • Contingent:
      • The property is only yours if some contingency is met, such as you turning 21, or marrying someone of the religion the original owner approves of.
    • Vested Subject to Defeasance:
      • The property is yours now, even though you may not possess it until some time in the future. Plus, the original owner retains the right to take it back before you get possession.