Trust, Creation, Spendthrift trust. Devise and Legacy. A father made a deposit with the Massachusetts Hospital Life Insurance Company of $25,000 in trust for the benefit of his son H. By a contract in writing between the donor and that company it was provided that during the life of H. the company should pay the income to the donor, for his use during his life, and at his death should pay it to the donor's brother for the benefit of H. "payable to him at his discretion, in such sums as he may think judicious." At the death of H. the trust fund was to be paid to the donor or his executors or administrators. The contract further provided as follows: "If the grantees of this annuity shall at any time become bankrupt or insolvent, or if their interest under this annuity shall be attached or seized on any process of law or in equity, their right to receive payment of the annuity in money shall forthwith cease, and thereafter, the company instead of paying said annuity in money to said grantees, shall retain the amount in their hands, and thereafter" shall apply it as directed. The testator died before his son H. The fifth paragraph of his will was as follows: "I give and bequeath to each of my children living at my decease the sum of $1,000, which is to be held in trust by my executors and to be paid or to be expended by them for the support of the children respectively during the year after my decease; and it is to be paid or expended in such sums and in such manner as may seem to my executors judicious." The sixth paragraph of his will was as follows: "Having invested in the Massachusetts Hospital Life Insurance Company . . . a sum for the benefit of each of my children, the income of which is for their support respectively; in case the income does not amount annually to $1,200 for each respectively, I direct my executors to supply any deficiency from that sum from the income of my other estate — so that each may have $1,200 for their support. And the $1,000 to be used for my son H. under the fifth item of this will, with the above provision, is to be in full of his portion of my estate, I being convinced that $1,200 per annum for his support will be sufficient for all his necessary wants and that more would be injurious." Held, that the contract and the sixth paragraph of the will must be construed together, that they created a trust to be administered wholly by the trustee under the contract, and that the expenses of administering the trust were to be deducted from the income in estimating the deficiency which must be supplied by the executors of the will to the trustee under the contract to give to H. an income of $1,200 a year. Held, also, that under the terms of the trust H. had no power to alienate the income which was payable to him at the discretion of the trustee, having no right to dispose of it until actually in his possession.
BRALEY, J.
Having previously purchased an annuity for the benefit of his son, Henry W. Austin, if he survived him, the testator when he came to dispose of his estate further provided, in the sixth clause of his will, that, if the income from the annuity did not annually produce the sum of $1,200, the deficiency should be supplied by the executors.
By the contract, to which express reference is made in this clause, the income was to be held in trust until its termination by the death of Henry, to whom no part of the capital was given. Sawyer v. Cook, 188 Mass. 163, 166. If instead of using the scheme of administration already perfected, the testator had intended that the deficiency, if any, should be paid directly to his son, he would have so provided. But, having received the income during his life, he must have known the average return, and with this knowledge directed that the difference between the income and the maximum amount, which might be increased under the first codicil, if he survived his sister Mary, should be supplied out of his remaining estate. The income had been put in a trust which would not terminate until the death of the surviving annuitant, and, when he made this further testamentary provision, the testator manifestly intended that the entire amount without division should be administered by the trustee, even if his services might not be gratuitous, rather than a part by him and the remainder, whether small or large, directly paid over to the beneficiary. Sells v. Delgado, 186 Mass. 25.
The amount established by the will is the net sum to be furnished, and all necessary expenses of the administration of the trust as one fund are to be taken out of the income, and the difference between the balance and the annual provision for the son's support measures the deficiency which the executors were directed to supply to the trustee. Under the residuary clause, this duty now devolves upon the trustees, and the income of the residuary legatee for life, or the University of Virginia, which by assignment from her has become vested with a partial interest therein, is subject to this reduction. Endicott v. University of Virginia, 182 Mass. 156.
But, if what we have said disposes of the exceptions of this defendant to the master's report as to whether a trust was established, whether the fund was to be treated as entire and whether the expenses of its administration were to be included in estimating the deficiency with which the residue was chargeable, there remains for decision the principal question, which is raised by the exceptions of the other defendants, whether the fund was alienable or subject to attachment for the debts of Henry W. Austin.
It may be said at the beginning, that this question was not decided by Endicott v. University of Virginia, 182 Mass. 156, as it was not referred to or involved in that decision. If, as argued by counsel for the creditors who claim under assignments or orders, the contract for the annuity was entered into and the will published before the decision in Broadway National Bank v. Adams, 133 Mass. 170, adjudicating that the founder of a trust may secure the income to the beneficiary without the power of alienation by him or being subject to attachment by his creditors, the decisions in Hall v. Williams, 120 Mass. 344, and Minot v. Tappan, 127 Mass. 333, 336, which antedated both instruments, had clearly recognized this right. The construction to be given then, as to whether there was an absolute gift of income or only a qualified interest not within the control of the beneficiary, well may rest on the law of those decisions as interpreted in the leading case. Dana v. Dana, 185 Mass. 156, 158. No set form of words is necessary to create such a trust, but the intention of the testator, or settlor, when ascertained must control. In the present case this is to be gathered from the contract and the will construed as one instrument. Thayer v. Wellington, 9 Allen, 283, 292. Newton v. Seaman's Friend Society, 130 Mass. 91, 93. A recurrence to the second paragraph of the contract shows that the donor did not intend that attaching creditors or an assignee in bankruptcy or insolvency should reach or succeed to the income, for it is expressly stated that upon the happening of either event the right of the beneficiary who is within the designation of "grantees" to receive the payment of the annuity should forthwith cease. If with this indication of the testator's thought we now recur to the will, the sixth clause speaks of the annuity previously purchased for each of his children, "the income of which is for their support respectively," and the deficiency is provided for, "so that each may have" a maximum fixed sum "for their support." The testator, as to his son Henry, adds, however, that this yearly allowance "for his support will be sufficient for all his necessary wants, and that more would be injurious." The habits of the son during the father's life do not appear, but, when the size of the estate disposed of is considered with the liberal provisions made for the other children, one of two conclusions is suggested, either an unjust discrimination was intentionally made, of which there is no evidence, or from the general tone of the expressions used, the improvidence of the son had become such that the testator believed his further bounty, if conferred, would be either squandered or lost through misfortune. In the light of the will as reflecting his continued purpose to secure the means of support for his son, the first paragraph of the contract should now be read. It is carefully phrased, and provides that upon the donor's death the accrued income is not to be paid directly to the annuitant by the company but is to be turned over to a trustee for his benefit, "payable to him at his discretion, in such sums as he may think judicious." The testator intended his son should not have the power to alienate or anticipate the income, and thus probably be left without any means of support as the income accrued, and to carry out this purpose substituted the instrumentality of a trustee, which otherwise would have been unnecessary, as the administration by the company would have been sufficient. By this construction, all the provisions of the contract and the will are given a consistent effect, and it is only when the money is actually received by him that his right to dispose of it begins, for, until then, the trustee in the exercise of a sound discretion can refuse to pay over anything but may apply the income as he deems advisable for the benefit of Henry. Wemyss v. White, 159 Mass. 484, 486. Nickerson v. Van Horn, 181 Mass. 562, 565, and cases cited.
The beneficiary having no power to alienate the income, his assignment of it or drafts and orders drawn by him on the trustee in payment of debts, are unenforceable, and the exceptions of these defendants to the master's report also must be overruled, and the report confirmed.
It further follows that the income in the possession of the company, which has accrued pending the litigation, and any deficiency remaining to be supplied by the trustees under the will, are payable to the trustee, Berry, by whom the entire amount is to be administered. Sells v. Delgado, ubi supra. Decree accordingly.