Thomas v. Gustafson

In Thomas v. Gustafson (2006) 141 Cal.App.4th 34, the decedent had a trust which provided that, upon his death, the trust was divided between a survivor's trust and a residual trust. Decedent had no children. His wife had one child by a prior marriage. The trial court found that the wife's survivor's trust was intended to go to her daughter and the residual was to go to the decedent's heirs. The wife, as trustee, and subsequently her daughter as successor trustee, used the entirety of the survivor's trust to purchase and renovate a building and then gifted the building to the wife and daughter as joint tenants. Once the survivor's trust was exhausted, the daughter looked to the residual trust to support her mother's care expenses. The trust document provided that the wife was entitled to support from the income of the survivor's trust, and then the residual trust. If the income of the two trusts was insufficient for her support then the principal of the survivor's trust was to be used followed by the principal of the residual trust. The trust provided that the trustee shall pay for the benefit of the spouse, such sums out of the principal of the trusts "as are necessary". The question before the trial court was whether the wife was entitled to support from the principal of the residual trust when the building was still available to her for her support. The trial court held that the assets of the building which should have been in the survivor's trust were to be used first before resorting to the principal of the residual trust. The Court of Appeal affirmed.