APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR
L. DUNNE, Judge, presiding.
MR. JUSTICE BUCKLEY DELIVERED THE OPINION OF THE COURT:*FN1 *FN1 JUSTICE BUCKLEY PARTICIPATED IN THIS OPINION WHILE ASSIGNED TO THE ILLINOIS APPELLATE COURT, FIRST DISTRICT.
Plaintiff, Theresa Favata, filed a complaint for declaratory judgment seeking to set aside an amendment to a land trust agreement. Plaintiff contended that this amendment, dated August 10, 1976 (1976 amendment), was an attempted testamentary disposition of real estate and violated the concept and definition of an Illinois land trust. Defendant Joseph Favata, Jr., filed a motion to strike and dismiss contending, among other things, that a July 18, 1975, amendment (1975 amendment), also was a void testamentary disposition. The trial court subsequently found both amendments were testamentary in character and violative of the statute of wills (Ill. Rev. Stat. 1975, ch. 3, pars. 4-1 through 4-15).
The facts are not in conflict. On December 14, 1964, Joseph Favata, Sr., entered into a written agreement with Exchange National Bank of Chicago entitled: Trust Agreement and Declaration of Trust. Under the trust provisions, Joseph Favata, Sr., was the prime beneficiary. Initially, the trust contained land and buildings known as 1910-1920 South Halsted, Chicago, Illinois. In 1973, during his lifetime, settlor transferred the fee interest to his condominium residence at 200 East Delaware, Chicago, Illinois, to the trust.
On July 18, 1975, Joseph Favata, Sr., as settlor, amended the trust agreement to read in relevant part:
"a. I shall remain the prime beneficiary under this Trust.
b. On the date of my demise, my interest not having been sold, assigned, transferred or otherwise disposed of, the entire remaining interest under this Trust shall vest in my daughter, Theresa Marie Favata * * *."
On August 10, 1976, the settlor again amended the trust as follows:
"a. In the event of my death, I leave my real estate located at 1910-20 South Halsted Street, Chicago, Illinois, to my son, Joseph Favata, Jr. * * *
b. In the event of my death, I leave my condominium located at 200 East Delaware Place, Chicago, Illinois, to the Executor under my Last Will and Testament, and also in accordance with the Joseph Favata Child's Trust, dated July 18, 1975, to be held in trust for my daughter, Theresa Marie Favata, of Laguna Niguel, California.
c. The power of direction shall be vested in Joseph Favata, Jr."
On September 6, 1976, Joseph Favata, Sr., died a resident of Cook County, Illinois. Subsequently, plaintiff filed the instant suit for declaratory judgment seeking an adjudication that the 1976 amendment was invalid. She further sought a declaration that the 1975 amendment was valid, thus making her the sole beneficiary of the trust.
Defendant filed his answer contending that the 1976 amendment was valid and enforceable. Additionally, defendant attached as exhibits copies of documents purporting to be the last will and testament and codicil of Joseph Favata, Sr., which were duly admitted to probate in the circuit court of Cook County. Defendant maintained these documents were relevant for interpreting settlor's intentions concerning the 1976 amendment. Plaintiff moved to strike and dismiss references to the will and codicil on the ground that they had no bearing on the issue of the validity of the 1976 amendment. Exchange National Bank of Chicago, as trustee, filed its answer and petition for instructions as to the proper disposition of the res. Plaintiff moved for judgment on the pleadings and summary judgment. In support of her motion for summary judgment, plaintiff attached the deposition of Ben Rosen, land trust officer for Exchange National Bank. Rosen testified that the 1975 amendment utilized traditional, customary and accepted language for the creation of a beneficial interest in plaintiff upon the death of the prime beneficiary. In Rosen's opinion, the 1976 amendment was legally insufficient because it did not speak of the handling of the beneficial interest but referred to post-death transfers of real estate.
On August 31, 1977, the circuit court denied plaintiff's motions. The court found, as a matter of law, that both 1975 and 1976 amendments were void in that they violated the statute of wills. From that judgment, defendant appealed and plaintiff cross-appealed.
The sole issue on appeal is the legal sufficiency of the 1975 and 1976 amendments.
1-3 The principal distinction between a will and a trust is that in the former, the beneficiary has no interest until the death of the testator, while in the latter, the beneficiary has an interest the moment the trust is created. (1 Perry, Trusts 119 (7th ed. 1929).) Consequently, if no interest passes to the beneficiary before the death of the settlor, the intended trust is testamentary and invalid for failure to comply with the statute of wills. (Farkas v. Williams (1955), 5 Ill.2d 417, 125 N.E.2d 600.) A disposition is also testamentary and violative of the statute of wills if the trust property or the beneficiary is not ascertainable until the death of the settlor. (1 Scott on Trusts 473 (3d ed. 1967).) Equally violative is a situation where the settlor does not intend that the trust should arise until his death, even though the trust property and the beneficiary are ascertained prior to his death. (Scott.) However, where a trust has been properly executed it will not be invalid merely because the settlor wanted to avoid compliance with the statute of wills or the necessity of probate administration. Conley v. Petersen (1962), 25 Ill.2d 271, 184 N.E.2d 888.
4, 5 We find that the 1975 amendment was valid and did not constitute a void testamentary disposition. Under its terms plaintiff received a substantial present interest at the moment the trust was created. She received a remainder interest in the entire beneficial interest of the land trust not otherwise disposed of during settlor's lifetime. Moreover, settlor used traditional, appropriate and customary language to designate a remainder interest in his beneficial interest. When properly drafted, as in the 1975 amendment, remainder interests in the beneficial interest of land trusts are present interests and do not circumvent the statute of wills. Conley v. Petersen (1962), 25 Ill.2d 271, 184 N.E.2d 888; Kenoe, Land Trusts §§ 3.8, 4.6, 4.7 (Ill. Inst. Cont. Leg. Ed. 1978) (hereafter Kenoe); Garrett, Land Trusts 7, 22 (Chicago Title & Trust Co. 1971). See also In re Estate of Sacks (1967), 89 Ill. App.2d 1, 231 N.E.2d 688.
6, 7 We turn next to the 1976 amendment. According to its plain meaning, settlor was attempting to transfer remainder interests in the real estate res of the land trust. In other words, settlor apparently attempted to transfer legal and equitable title to his son and daughter. All parties concede that this is not possible because in a land trust legal and equitable title is vested solely in the trustee. Settlor could only convey his beneficial interest in the trust. Chicago Federal Savings & Loan v. Cacciatore (1962), 25 Ill.2d 535, 547, 185 N.E.2d 670; Department of Conservation v. Franzen (1976), 43 Ill. App.3d 374, 356 N.E.2d 1245.
Only if the language of the 1976 amendment is construed to mean that settlor was transferring his beneficial interest could this amendment be valid. We reject this interpretation and hold that the ...