The question of the legal validity of a self-settled trust was answered by Limb v. Aldridge, 1999 OK CIV APP 31, 978 P.2d 365. This Court of Civil Appeals decision was released for publication. In Limb the settlor, executed a revocable living trust during his lifetime. He transferred his property into his trust. He was the sole trustee and sole beneficiary of his trust during his life. His trust named beneficiaries who were to take the trust property following his death.
The Limb Court stated:
 ¶ 4 A “living trust” is not specifically defined by statute in Oklahoma,… Generally speaking, a “living trust” is a trust which takes effect during the life of the settlor, as distinguished from a testamentary trust which is created upon the settlor’s death. In the last two decades, a revocable living trust in which the trustor declares himself trustee and also sole beneficiary of the trust income during his life has been widely promoted as a “will substitute” which purports to avoid the time and expense of probate…  ¶ 5 … Appellant challenged the trust Father created because Father was settlor, sole trustee, and sole beneficiary during his life. She cited treatise authority and case law that, in the absence of an effective separation of legal and beneficial interests in the trust property, a trust would not arise. She also argued that the trust was “illusory” for that reason. ¶ 7 … We do not agree with Appellant that the Trust was illusory merely because Father was the sole trustee and sole beneficiary during his life. … ¶ 8 The validity and legal effect of revocable, “self-trusteed” living trusts has been discussed in only a few cases. The Colorado Court of Appeals has held that a revocable living trust is valid even though the settlor names himself as trustee, and reserves the trust income for life, the right to withdraw any portion of the trust property, and the right to alter, amend, or revoke the trust, and retains exclusive control over the administration of trust assets. In re Estate of Brenner, 37 Colo.App. 271, 547 P.2d 938, 941-42 (1976), cert. denied; see Oken v. Hammer, 791 P.2d 9, 11 (Colo.Ct.App.1990). > (FN5) In Friedberg v. Sunbank/ Miami, N. A., 648 So.2d 204 (Fla.App.1994), the Court found that settlor had created a valid revocable living trust which prevailed over his widow’s right to elective share of her husband’s estate… Although the case law is scant, the prevailing view thus appears to be that the merger doctrine will not apply so long as the settlor has designated some beneficiary, even a contingent beneficiary, other than himself. See, e.g., In re Application of Sackler, 145 Misc.2d 950, 548 N.Y.S.2d 866, 869 (1989)… > >  ¶ 9 Therefore, we hold that the trial Court was correct when it decided that a valid trust had been created.”
Previous to Limb, the Oklahoma Supreme Court in Thomas v. Bank of Oklahoma, 1984 OK 41, 684 P2nd 553 affirmed the legality of using a revocable trust when it held, “We also distinguish between the general revocability of a trust, the legality of which there is no doubt….”
The Oklahoma legislature has recognized the independent legal standing of a trust. 60 OS§175.6a “Any estate in real property may be acquired and held in the name of an express private trust which is a legal entity. Where real property is so acquired, any conveyance, assignment or other transfer shall be made in the name of such trust by the trustee or Trustees of said trust. When real property is transferred or acquired in the name of the trust …the trustee shall file a memorandum of trust with the county clerk …” This statute recognizes that a trust may own property as a separate legal entity, apart from the trustee.
In the Matter of Estate of Stokes, 1987 OK 119, 747 P2d 300 R.D. Stokes withdrew money from his joint account and purchased three certificates of deposit in the name of R. D. Stokes Trustee for Gladys Stokes and Robert D. Stokes, Jr. and V. L. Stokes and Ruby Vinson. The interest from the certificates of deposit was deposited monthly back into his joint account. The issue before the Oklahoma Supreme Court was whether a valid trust has been created. The Stokes Court held:
There are general recognized elements necessary for the creation of a valid and enforceable trust, including: a present intent by a competent settlor that a competent trustee (who may be the same person as the settlor) shall hold and manage an ascertainable trust res for the benefit of a sufficiently certain beneficiaries, accompanied by an act which constitutes a present, complete disposition of the trust property (even if the enjoyment by the beneficiary is to take place in the future.)
We therefore hold that in Oklahoma, a valid trust may be created by a depositor who places money on deposit in any regular savings scheme, including the purchase of a certificate of deposit, when such deposit is made in the name of the depositor as trustee for other designated individuals….The trust thus created, without more, is revocable and tenative during the life of the depositor, and vests in and is enforceable by the beneficiary thereof upon the depositor’s death. The res of such a trust passes to the beneficiary by its own terms, independent of the depositor’s estate.”
The Supreme Court in Stokes approved a very informal trust. It was just one sentence. Yet it was held to be a lawful trust. The settlor, R. D. Stokes, who was the depositor, was the sole trustee and beneficiary during his life. The beneficiaries named on the certificates of deposit in Stokes had no legal right to the money until the settlor’s death. The Court held that the money owned in the name of the trust at the death of the settlor would pass to the beneficiaries outside of the settlor’s probate estate. The Court held that the settlor could be the trustee and at the death of the settlor the beneficiaries would have the right to enforce the terms of the trust. The Stokes decision supports the Limb decision.
If you have a question about a living trust call Brent D. Coldiron at (405) 478-5655 or 737-2244. His offices are at 1800 East Memorial Road, Suite 106, Oklahoma City, OK 73131 and 2801 Parklawn Drive, Suite 503, Midwest City. Brent has over 42 years experience. He knows what to do!