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Inherited Assets

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Husband Keeps Inherited Assets.  During this twenty-five year marriage, the husband was the primary wage-earner and primary homemaker and the wife’s contributions to the marital partnership were minimal.  This imbalance justified a disparate division of assets in the husband’s favor – including an order permitting him to keep all of his premarital inherited assets.  The Court also noted that, with respect to inherited assets, the judge properly considered (1) the source of the assets, (2) each parties’ role in managing the assets., and (3) whether they had been kept separate or commingled with the parties’ jointly-owned property. Notably, the parties used income from the trusts as a stream of income but the principal of the trusts remained largely untouched over the years.    Williams v. Massa, 431 Mass. 619 (2000)
 
Inherited Trust Divided After a Long-Term Marriage.  After a forty-eight year marriage, the parties divorced and the Wife appealed the judgment, complaining that the judge improperly included in the marital estate her interest in a trust, which was settled and funded in 1963 by her father The trust instrument provides that the trustee should “in its discretion pay to [the wife] so much or all of the income and principal of [the trust] as in its discretion it deems advisable to provide for the comfort, welfare, support, travel and happiness of [the wife] . . .” The Appeals Court affirmed the judgment, reiterating that a party’s estate includes all property to which [she] holds title, “however acquired.:  Here, the Appeals Court interpreted the trust to give the wife “a present, enforceable, equitable right to use the trust property for [her] benefit.” Notably, throughout the marriage, the income and gains from the trust at issue here had been reinvested in order to preserve it for the benefit of the parties’ children.  Nevertheless, the parties relied on the asset.  It provided them “with a substantial insurance policy against economic hardship and also permitted them to direct their other marital assets, such as the husband’s salary, to the maintenance of a higher standard of living than their earned income allowed.” The asset division was upheld because of the “length of the marriage, the husband’s contributions, and their mutual reliance on the trust fund.”  Comins v. Comins, 33 Mass. App. Ct. 28 (1992)
 
Real Estate Trust With Spendthrift Clause is Divisible Asset. At issue here is whether a real estate trust of which the husband was a beneficiary was properly included in the marital estate and subject to division.  Per the trust terms, it is to last for 21 years from the death of the husband’s father during which period husband cannot require a partition or a distribution.  The trust, however, does grant him, i.e. equitable interests, the right to live in the house or rent it out.  After termination, he is entitled to a share of the proceeds of the trust. His interest is subject to divestment only if he does not survive until the trust terminates according to its terms. The trust has a spendthrift clause that provides that “the interests are inalienable and not subject to any legal or equitable proceedings by creditors or others.” The Court found that the husband “has a present, enforceable, equitable right to use the trust property for his benefit” and “a vested right to the future receipt of a share of the legal title to the trust property.”  Neither the difficulty in valuation nor the inalienability of the spendthrift clause affects its character as divisible.  The husband’s beneficial interest in the trust is subject to equitable distribution.  Lauricella v. Lauricella, 409 Mass. 211 (1991)
 
Trust Interest Subject to Power of Appointment. Not a Marital Asset.  This case involved five trusts in which the wife had an interest. The trial court held that all five were included in the marital estate.  On appeal, the Appeals Court held that one of the trusts should not have been included in the estate because the wife’s remainder interest was subject to divestment in the event that the wife’s mother exercised a power of appointment.  Therefore, the Appeals Court reasoned, her interest under the trust was similar to an expectancy interest under a will and should have been excluded from the marital estate and instead considered under the § 34 criterion of “opportunity of each for future acquisition of capital assets and income.”  The remaining trusts are on a different footing.  They are subject only to her surviving her mother – – which under the case law, does not “bar inclusion within the marital estate.”  S.L. v. R.L., 55 Mass. App. Ct. 880 (2002)
 
Spendthrift Clause and Survivorship Insufficient Bases to Exclude Asset.  The Appeals Court held that a husband’s remainder interest in a trust, subject to survivorship and a spendthrift clause, was properly included in the marital estate.  Regarding the survivorship issue, the Court noted that the husband was twenty-eight years old.  Regarding the spendthrift clause, the Court noted the inalienability of the interest is insufficient to exclude it from the marital estate.  Davidson v. Davidson, 19 Mass. App. Ct. 364 (1985)
 
Seven Trusts – All Excluded from Marital Estate.  The case involves seven trusts associated with the husband, none of which the trial judge included in the marital estate for various reasons. The Appeals Court affirmed.
 
Regarding one trust, the Court found that the husband does not have a present, enforceable right to use the principal of the trust; as such, the trust principal was considered “too remote or speculative” to be included within the marital estate.
 
In three other trusts, the husband’s interest was also considered to remote or speculative for inclusion in the martial estate. These trusts conditioned husband’s interest not only upon his survival to a certain date, but upon his father’s death by that date. Certain conditions of survivorship might not be a bar to inclusion in the marital estate depending on the ages and health of the parties involved but with these trusts, the Appeals Court wrote, it cannot be fairly said that there is a “likelihood,” much less a fair certainty, that the husband’s father will not be alive on a certain date, and the husband will be alive on that date.
 
Similarly, in another trust, the husband’s remainder interest, was conditioned not only upon his surviving his father, but also upon his surviving him by twenty-one years.  As such, his interest was properly excluded from the marital estate as it “was susceptible of complete divestment upon the [husband’s father’s] exercise of the power reserved to [him] to appoint the remainder trust beneficiaries under the provisions of [his] will.”
 
Where the judge excluded the husband’s interests in these trusts, she properly considered them under the § 34 criterion “opportunity of each [spouse] for future acquisition of capital assets and income.”  D.L. v. G.L.,61 Mass. App. Ct. 488 (2004)