Under his will and codicil, Harry Darby created a trust for the benefit of his daughter, Marjorie, and her three daughters. Under the trust terms, Marjorie was to annually receive $24,000 from the trust net income, along with discretionary principal. Each of Marjorie’s three daughters was to annually receive $8,000 from the trust net income.
Marjorie petitioned the court to modify the trust by increasing her annual distribution to $40,000, adjusted for inflation, and giving herself a power of appointment over the trust assets. Marjorie alleged in support of her petition that: (1) the trust was her sole source of income and $24,000 per year was insufficient to cover her basic needs; and (2) modification was proper due to circumstances not anticipated by the settlor, necessary to achieve Harry’s tax objectives by avoiding the imposition of generation-skipping transfer taxes, and not inconsistent with a material purpose of the trust. The district court allowed the modification, and Marjorie sought review by the highest court of Kansas to render the modification binding on the IRS.
On appeal, the Supreme Court of Kansas reversed the district court and rejected each of Marjorie’s reasons for modification under the Kansas Uniform Trust Code (K.S.A. 58a- 101 et seq.) on the following grounds: (1) there was insufficient evidence that Harry intended to create a support trust for Marjorie; (2) because Harry did not intend to create a support trust and rather specified fixed sums for his daughter and each of his granddaughters, increasing the amount payable to Marjorie would violate a material trust purpose by decreasing the funds available for Harry’s granddaughters; (3) modification to enable distributions in excess of the specific monthly amounts set forth in the trust would be inconsistent with the material purpose manifested by the spendthrift provision; (4) no evidence in the record indicated that Harry failed to anticipate the potential devaluation of future distributions by inflation; (5) increasing the distributions to Marjorie would inherently frustrate the growth of the trust principal and reduce later distributions; and (6) Harry just as likely intended exposure to the GST tax for his grandchildren and avoidance of federal estate tax on Marjorie’s death, and therefore the court refused to modify the trust provisions to achieve tax benefits when it would alter the dispositive provisions of the trust.