on April 7,
2016
On April 5,
2016, the collective eyes of Massachusetts divorce attorneys and estate
planners were fixed on the Supreme Judicial Court, where the highly-anticipated
oral arguments on “further appellate review” of Pfannenstiehl
v. Pfannenstiehl took place.
The 2015 Appeals Court decision received national attention for
its potential detrimental impact on the estate planning goals of families who
desire to shield trust assets from divorce claims.
In Pfannenstiehl,
both the Trial Court and the Appeals Court went to great lengths to ensure that
the wife would benefit, at least indirectly, from an irrevocable trust
established by her soon-to-be-ex-husband’s father even though the husband had
no control over the trust and could receive distributions only at the
discretion of the trustees.
The husband had no present, guaranteed, enforceable
interest to receive or use assets or income from the trust. The trustees’
discretion was limited to making distributions under an “ascertainable
standard” for a beneficiary’s health, education, maintenance and support.
The
Trial Court and Appeals Court decisions failed to account for the fact that the
trustees did not make distributions to the husband for most of the marriage,
and that the husband received distributions only during the final two years of
the marriage.
The definition of “marital property” in
Massachusetts is extraordinarily broad. In essence, the Court in divorce
proceedings may assign any part or all of a spouse’s “estate” to the other
spouse. This generally may include premarital property as well as property
acquired during the marriage, and may also include vested interests in an
estate or trust. However, even with the broad definition of marital property in
Massachusetts and the broad discretion of judges to divide it, many believe
that the court in Pfannenstiehl went too far
because the husband’s interest in the trust was so indefinite that it is not
property.
Burns & Levinson’s own Bob O’Regan delivered
a compelling argument to the
SJC on Tuesday on behalf of the husband and trust beneficiary in this case. He
focused on the (perhaps unintended) consequences that the Appeals Court
decision could have on Trust & Estate law. Bob encountered a “hot bench” –
justices who clearly were well-prepared for this argument and peppered both
lawyers with questions and hypothetical situations.
Perhaps most on point, not
unexpectedly, was Justice Duffly, a former Probate and Family Court and Appeals
Court judge, who engaged Bob regarding thepermissible ways
in which a judge may consider a trust interest such as this in divorce
proceedings. In other words, not as an asset to be reached, valued and divided
in the divorce, but rather as a potential future opportunity for
the beneficiary spouse to acquire assets, which could perhaps justify a
disproportionate award of the remainingmarital property to
the non-beneficiary spouse.
This is a tricky, nuanced and important legal issue. We look forward to
receiving the SJC’s guidance.
Hope this
helps!
Tiffany
Tiffany
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