Update: The MBA’s Lawyer’s Journal just published a sequel to the article Attorney Weil wrote about the division of trust interests in divorce actions. The article can be found in the September edition of Massachusetts Lawyer Journal
Divorce disputes involving a spouse’s rights as a beneficiary of a third-party trust are often complex and bitterly contested. Typically, a beneficiary-spouse will argue that the settlor (parent) had no intention of subjecting the trust assets to a property division for the benefit of a former son-in-law or daughter-in-law, and that the terms of the trust expressly prohibit the Court from invading the trust for this purpose. The non-beneficiary-spouse will likely argue that he or she made a substantial contribution to the marriage, and that the family relied on the trust funds to live, such that a division of some portion of the trust principal is both warranted and within the Court’s authority to divide pursuant to G.L. c. 208, § 34. What is a Probate Court to do?
Pfannenstiehl – The Most Recent Controversy
In Pfannenstiehl v. Pfannenstiehl, the Appeals Court recently upheld a Probate Court decision awarding a non-beneficiary wife a substantial portion of a marital estate, which included her husband’s interest in a multi-million dollar irrevocable spendthrift trust established by the husband’s father. The Probate Court valued the husband’s beneficial interest in the trust at approximately $2.3 million. Throughout the marriage, the husband received distributions of income and principal, which abruptly ceased upon the eve of his filing for divorce. The wife, who, at the urging of the husband and his family, gave up a military career and devoted herself to the care of the parties’ two special needs children, was told that the spendthrift provision of the trust prohibited the trustees from continuing to issue distributions to the husband. [Read more…]