Holte v. Rigby: Limits on Offsetting Successor Life Beneficiaries’ Vested Income Interests

Introduction

Holte v. Rigby, 2025 ND 77 (N.D. 2025), arises from alleged misappropriation of trust income by Nathan Holte, a former trustee-beneficiary of the Kermit and Ardella Family Mineral Trust. After Nathan’s death in April 2021, his daughter Tiah E. Rigby succeeded to his life interest in one-quarter of the trust’s net income. Co-trustees Steven and Sheldon Holte sought to offset Rigby’s distributions to recoup funds Nathan diverted to his ex-wife and to remedy thefts from his mother Ardella’s personal accounts. Rigby challenged the offsets, asserting her right to distributions vested on Nathan’s death and that she bore no personal liability. The Supreme Court of North Dakota affirmed in part, reversed in part, and remanded.

Summary of the Judgment

The court held:

• Under the unambiguous trust agreement, successive life interests in one-quarter shares of income vest immediately upon a prior beneficiary’s death.
• Rigby’s beneficial interest vested on her father’s death; she had no personal liability for Nathan’s misdeeds.
• Co-trustees may not withhold or offset her income distributions to recoup the portions of trust income Nathan misappropriated.
• The district court correctly refused to offset Rigby’s distributions for thefts from Ardella’s personal (non-trust) accounts and correctly held that such claims must be pursued against Nathan’s estate.

Analysis

Precedents Cited

• In re Curtiss A. Hogen Trust B, 2018 ND 117, ¶ 29, 911 N.W.2d 305 – Trustee liability for breach and available remedies under N.D.C.C. §§ 59-18-01, 59-18-02.
• Hurtig v. Gabrielson, 525 N.W.2d 612 (Minn. Ct. App. 1995) – Broad trustee discretion in income distributions where trust instrument expressly provided “absolute discretion.” Distinguished for narrower distribution mandate here.
• Blakemore v. Jones, 22 N.E.2d 112 (Mass. 1939) – Principle that a trustee-beneficiary’s share may be charged for breaches of trust; declined to apply where beneficiary’s spendthrift provision barred claims once interest ended at death.
• In re Brereton’s Estate, 130 A.2d 453 (Pa. 1957) – Remainder interests cannot satisfy predecessor life beneficiary’s debts after death; successor interest not liable for pre-death obligations.
• Restatement (First) of Trusts §§ 104, 257 – Beneficiary liability to the trust and right of other beneficiaries to charge a trustee-beneficiary’s interest for breaches of trust.

Legal Reasoning

The court applied North Dakota contract‐interpretation rules (N.D.C.C. ch. 9-07) to the trust instrument, finding it unambiguous. Paragraph E mandated monthly distributions to life beneficiaries and created successive vested life interests. On Nathan’s death, Rigby’s interest vested automatically; no provision allowed withholding of a current beneficiary’s income for past breaches by a prior beneficiary. Although Paragraph D(4) granted trustees broad powers to “compromise, settle and adjust all claims,” that general grant could not override the express distribution requirement. Analogies to cases offsetting living trustee-beneficiaries’ breaches were rejected because those trustees still held interests; here, Nathan’s life estate ended at death, and Rigby—uninvolved in any wrongdoing—could not be saddled with his debts.

Impact

This decision crystallizes that:

• Trust drafting must clearly address post-death recoupment rights if grantors intend successor beneficiaries to bear predecessor trustee-beneficiary liabilities.
• Courts will enforce express distribution provisions over general trustee powers.
• Successive life interests vest at the moment of the predecessor’s death and are protected from claims related solely to the predecessor’s misconduct.

Future disputes will turn on the precise language of distribution mandates and the separation of trustee powers from beneficiaries’ vested rights.

Complex Concepts Simplified

• Life Interest (Equitable Life Estate): A beneficiary’s right to receive income from trust assets during life; here, Nathan and then Rigby each enjoyed a life interest in one-quarter of the trust’s net income.
• Successive Life Interests: When one beneficiary’s interest ends upon death and automatically passes to another (per stirpes), creating a seamless succession.
• Offset: A trustee’s withholding of distributions to recoup losses; permissible against a trustee-beneficiary’s own share but not against a successor’s separate vested share.
• Equitable Lien: A security interest imposed by a court; here inapplicable because Rigby’s share was not Nathan’s asset at death.

Conclusion

Holte v. Rigby reaffirms that express distribution clauses prevail over broad trustee powers and that successor life beneficiaries’ vested interests are insulated from predecessor trustee-beneficiary misconduct unless the instrument provides otherwise. Trustees must look to the wrongdoer’s estate for restitution of non-trust misappropriations, and grantors seeking post-death recoupment must draft clear, explicit trust provisions. This ruling will guide trust drafting and administration, ensuring clarity on beneficiaries’ rights and trustees’ remedial powers.