The Eighth Circuit Court of Appeals rejected a settlement proposed by a trustee that disregarded a trustmaker’s intention that if her gift to her mother lapsed, the mother’s share would go to the other trust beneficiaries rather than to the mother’s issue. In re Stiny Trusts, No. 24-2008, 2026 WL 469357 (8th Cir. Feb. 19, 2026).
Mary Stiny and her husband, Elijah, created a trust holding approximately $12 million in assets. The trust’s terms provided that, when one of them died, the trust would be divided into a survivor’s trust and an exemption trust. After Elijah died, Mary amended the terms of the survivor’s trust. In her amendment, Mary made her mother, Della Moore, the beneficiary of a 2.66 percent interest, but provided that the gift would lapse if Della did not survive Mary. The survivor’s trust also contained an antilapse provision specifying that, except as otherwise provided, if a beneficiary predeceased Mary, the beneficiary’s share would be distributed to their living issue, or if no living issue, to the other trust beneficiaries. Della died in 2017, and Mary died in 2019.
The trustee filed a motion for approval of a proposed settlement of Della’s 2.66 percent interest, reflecting an agreement he had entered into with some of Della’s other descendants, who were not named beneficiaries, whereby Della’s 2.66 percent interest would pass to them. However, the district court denied the motion, holding that, under the terms of the survivor’s trust, Della’s share had lapsed because she had died before Mary and, under California law, Della’s lapsed share would transfer to the other named beneficiaries of the survivor’s trust. The court further held that the parties to the agreement were, in fact, proposing a modification that did not meet the requirements of California’s trust modification statute. The would-be beneficiaries, mainly Della’s other children, appealed.
The Eighth Circuit Court of Appeals rejected Della’s children’s argument that the settlement should be permitted because the survivor’s trust was ambiguous. The court noted that California law applied, and that under the California Probate Code, the intention of the transferor—in the present case, Mary—controls the legal effect of the dispositions made in the trust. In its de novo review of the interpretation of the survivor’s trust, the court found that it unambiguously provided that Della’s share lapsed if she died before Mary. The lapse triggered the California Probate Code’s provision for the distribution of failed transfers, Cal. Prob. Code § 21111(b), which provides that upon lapse, the share passes to the other beneficiaries in proportion to their other interest in the trust. Therefore, upon Della’s death, her share lapsed and passed to the other named beneficiaries of the survivor’s trust.
Della’s children argued that the survivor’s trust was ambiguous because it included an antilapse provision that applied if a beneficiary predeceased Mary. The court disagreed, holding that their interpretation ignored the language of the antilapse provision, which applied “except as otherwise provided.” In re Stiny Trusts, No. 24-2008, 2026 WL 469357, *3 (8th Cir. Feb. 19, 2026). The court found the children’s assertion of ambiguity was unreasonable because the survivor’s trust provided otherwise by unambiguously stating that the 2.66 percent share to Della would lapse if she died before Mary. Further, the court held that because Mary had expressly made no provision in the survivor’s trust for her son, John, and had not included any of her siblings as beneficiaries, Della’s children’s interpretation as the would-be beneficiaries—that Della’s share should be distributed to her living issue under the antilapse provision—disregarded Mary’s intentions as expressed in the trust instrument by providing them a portion of Della’s share.
The court also determined that the district court lacked authority to modify the survivor’s trust because the requirements for modifying a trust under Cal. Prob. Code § 15403 had not been met. First, all beneficiaries must consent to modifications. However, only two of the named beneficiaries had consented to the proposed settlement (which the court construed as a petition for modification), and none had joined in the motion for settlement approval. Second, the reasons that Della’s children provided for the modification, i.e., preserving family harmony, did not outweigh the need to accomplish the material purpose of the survivor’s trust, i.e., following Mary’s distributive intent.
As a result, the court affirmed the district court’s judgment.
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