Matter of Wilcox, 194 N.Y. 288 (1909)
A trust is invalid if, under any possible contingency, it could suspend the absolute power of alienation for longer than two lives in being at the creation of the trust.
Summary
This case addresses the application of the rule against perpetuities to testamentary trusts. The testator created a trust that, depending on various contingencies, could potentially extend beyond two lives in being at the time of his death. The court found that the possibility of such an extension rendered the entire trust invalid, emphasizing that the validity of a trust is determined not by what actually happens, but by what could possibly happen under its terms. This ruling underscores the strict interpretation and application of the rule against perpetuities to prevent prolonged restrictions on property alienation.
Facts
The testator’s will established a trust for the benefit of his wife, son, and daughter. After the wife’s death, the will divided the estate into two independent trusts for the son and daughter. The son’s trust was to last for his life or until he reached 30 years of age. The will specified different contingencies: if the son died before the wife, his income share would be split between the wife and daughter; if the son survived the wife, his trust would be bounded by his life or reaching age 30.
Procedural History
The lower court initially upheld the validity of the trust but deemed the accumulation of income provision void. The General Term reversed this decision. The Court of Appeals reviewed the case to determine the trust’s validity under the rule against perpetuities.
Issue(s)
Whether a trust is valid if, under any possible contingency, it could suspend the absolute power of alienation for a period longer than two lives in being at the time of the trust’s creation.
Holding
No, because New York’s rule against perpetuities prohibits any trust that, under any circumstance outlined in the will, could suspend the power of alienation beyond two lives in being at the testator’s death.
Court’s Reasoning
The court emphasized that the validity of a trust under the rule against perpetuities is determined by possible, not actual, events. The court stated, “Where a trust is created which by no possibility and in no contingency can endure longer than during the existence of two lives in being, of what consequence can it be that if one contingency happen, the estate is to be measured by two named lives, and if the other contingency happen, the estate is still to be measured by two named lives, but one of them is different from the one named in the other contingency?” The court determined that the will’s provisions, particularly those related to the son’s potential death before the wife, created a scenario where the trust term was limited by the lives of the wife and daughter. However, if the wife died first, the trust was limited by the lives of the wife and son (or until the son reached 30). Since the two lives measuring the duration of the trust differed based on the contingency, the court had to determine if this arrangement violated the rule. The Court of Appeals reversed the General Term and affirmed the Special Term, holding the trust valid.