Massachusetts Agencies

Trusts: Merger

Trusts and Trustees

So long as all the legal and all equitable interests have not vested in one person a trust will be deemed to exist and no merger will be found. See the discussion in Fratcher, Scott on Trusts, Little, Brown and Company (Fourth Edition, 1991), §99, et.seq. In fact, part of the beneficial interest is vested in the son of the settlor/trustee, thus preventing merger. Here, the problem your examiner seems to be having is that the trustee, who is also the settlor, had a right to invade the principal, suggesting to the examiner that a merger had occurred. Admittedly, although some old Massachusetts decisions tended to find no trust where there was a retained power to invade the principal,[1] that position was later abandoned[2] because of the impossibility of drawing a tenable distinction between such a reserved power and the general more awesome powers to revoke or alter the trust, which have never been held to impair the existence of the trust. See Powell on Real Property, Matthew Bender, ¶507.

Although there is no merger, there could be death tax implications, just as there might be in the event of a reserved power to revoke the trust. However, these considerations would not include dealing with any lien to secure such liability, because a conveyance out to a purchaser for value will divest the title of any such lien under both federal[3] and state[4] law.

The fact that multiple trustees are also the persons who are the beneficiaries of the trust will not effectuate a merger. In such a case, although there is commonality in the identity of the trustees and beneficiaries, their interests are different: each trustee holds title for both beneficiaries, thus preventing a merger. See Fratcher, id.

1 McEnvoy v. Boston Five Cents Savings Bank, 201 Mass. 50, 87 N.E. 465 (1909).

2 Cohen v. Newton Savings Bank, 320 Mass. 90, 67 N.E.2d 748 (1946), National Shawmut Bank v. Joy, 315 Mass 457, 53 N.E.2d 113 (1944).

3 See IRC §6324(a).

4 See G.L.c. 65C, §14.