Irwin Union Bank v. Long
160 Ind. App. 509, 312 N.E.2d 908 (1974)
Victoria and Philip got a
divorce. As part of the settlement, she obtained a judgment for $15k.
Phillip did not pay the
Philip did have a trust fund
set up by his mother at Irwin Union Bank.
The trust agreement allowed
Philip to withdraw up to 4% of the principle per year, with written
That's a general inter
vivos power of appointment.
Victoria sued Irwin to get the
money in the trust.
The Trial Court found for
Irwin Bank and declared that any funds which were not exempt from
execution should be given to Victoria, and ordered them to pay her up to
4% of the trust assets per year. Irwin Bank appealed.
Irwin Bank argued that
Phillip's right to withdraw 4% per year was a power of appointment. Since he had not exercised that power, Irwin
Bank was not authorized to pay it out.
Victoria argued that Philip
had an absolute right to take the 4% whenever he wanted, so the money was
reachable. It wasn't a power of appointment, it was a vested property right.
The Appellate Court reversed.
The Appellate Court found
that Philip had a power of appointment because in essence he had the ability to direct the disbursement
of money he didn't own. Until the money came out of the trust it was not
owned by Philip, and therefore Victoria could not seize it to pay
"Like any other offer
to donate property to a person, no title can vest until he accepts the
offer, nor can a court of equity compel him to accept the property
against his will, even for the benefit of creditors."
So basically, it was as if
Philip's mother was holding out a handful of money saying, "go on,
take it." Until Philip accepts, and takes the money, it is still
legally his mother's. Victoria couldn't take Philip's mother's property
to pay Philip's debts.
The only thing Victoria
could do was wait until Philip exercised his power, at which point the
money would be his and she could grab it immediately.
The Court in this case was
very strict, and a number of States have Statutory provisions that would
have allowed Victoria to reach Phillip's trust (after the rest of
Phillip's assets were exhausted.)