Appeals Court rules interest in irrevocable trust is a
On Aug. 27, the Massachusetts Appeals Court held in
Pfannenstiehl v. Pfannenstiehl, Nos. 13-P-906, 13-P-686,
& 13-P-1385, 2015 Mass. App. LEXIS 123, that a husband's
interest in an irrevocable trust with an ascertainable standard is
a "vested beneficial interest subject to inclusion in the marital
estate." This is a significant decision that could impact the way
in which trusts and estates practitioners in Massachusetts draft
estate plans for clients concerned about divorce protection.
At issue in the case is an irrevocable trust established by the
husband's father for the benefit of the husband and his siblings,
as well as their children. The trust contains an ascertainable
standard, which obligates the trustees to make distributions of
income and principal "to provide for the comfortable support,
health, maintenance, welfare and education of [the beneficiaries]."
The trust also contains a spendthrift clause, which prohibits the
assignment or attachment of trust assets to creditors of any
Between 2008 and August 2010, the trustees made distributions
from the trust to the husband totaling $800,000. The parties relied
heavily on these distributions; indeed, the distributions allowed
the parties to live an upper-middle-class lifestyle while also
affording to care for their two children, both of whom have special
needs. After August 2010, one month before the husband filed for
divorce, the trustees ceased making distributions to the husband.
They continued, however, to make distributions to the husband's
After an eight-day trial, the trial court held that the
husband's interest in the trust constituted marital property
pursuant to G.L. c. 208, § 34. The trial court based its ruling on
its determination that the husband's interest was "presently
enforceable" and that the parties had relied on the distributions
from the trust to sustain their lifestyle during their marriage.
The trial court also found that the husband had a 1/11 beneficial
interest in the trust. Accordingly, the trial court ordered the
husband to pay 60 percent of the value of his 1/11 share to the
wife in 24 monthly payments totaling $1,133,047.79.
On appeal, the husband contended that he did not have a
"present, enforceable right" because the trustees could refuse (and
indeed had refused) to make distributions to him pursuant to the
trust's ascertainable standard. He also argued that the existence
of a spendthrift clause rendered his interest in the trust
incapable of division as marital property.
The Appeals Court, in a 3-2 decision, affirmed the trial court's
decision that the husband's interest in the trust constituted
marital property subject to division pursuant to G.L. c. 208, § 34.
Specifically, the Appeals Court held that the trust's ascertainable
standard gave the husband a "present enforceable right to
distributions from the 2004 trust" because the trustees of the
trust "were obligated to, and actually did, distribute the trust
assets to the beneficiaries, including the husband, for such things
as comfortable support, health, maintenance, welfare and
education." Therefore, the court held, "the ascertainable standard
embedded in the 2004 trust, the enforceability of that standard for
distributions to the husband, and the vested nature of the
husband's interest in the 2004 trust warranted the [trial court]
judge in including the 2004 trust in the marital estate."
In reaching this conclusion, the Appeals Court weighed heavily
the parties' reliance on the trust distributions, emphasizing that
the distributions "were woven into the fabric of the marriage," and
"were integral to the family unit."
Relying on "settled trust law," the Appeals Court rejected the
husband's argument that the presence of a spendthrift clause
shielded his trust interest from being included in the marital
estate. In fact, the court opined that the "spendthrift provision
is being invoked [by the husband] as a subterfuge to mask the
husband's income stream and thwart the division of the marital
estate in divorce," and that the "spendthrift scheme … is virtually
empty of purpose except as a form of insulation to inclusion and
valuation in the divorce process." While the Appeals Court held (as
it has in the past) that the presence of a spendthrift provision
does not preclude inclusion of a trust interest in the marital
estate, the court did not hold that trustees of an irrevocable
trust can be ordered to make distributions directly to the
non-beneficiary divorcing spouse.
Lastly, the Appeals Court affirmed the trial court's award of
attorneys' fees to the wife, although neither the trial court nor
the Appeals Court held that the award of attorneys' fees need be
paid from the trust assets.
The dissenting opinion states that the husband's interest in the
trust should have been considered under G.L. c. 208, § 34 as an
"opportunity for each [spouse] for future acquisition of capital
assets and income" because the value of the husband's interest in
the trust was "too remote and speculative." In reaching this
conclusion, the dissent notes that the trust has an open class of
beneficiaries, making the value of the husband's interest in the
trust uncertain. The dissenting opinion also states that the
husband's right to the trust assets was uncertain because the
ascertainable standard allows the trustees to determine the amount
and timing of distributions as well as consider the funds available
to the beneficiaries from other sources.
The Appeals Court's decision is significant because it holds
that an interest in an irrevocable trust with an ascertainable
standard -- where there is a history of distributions woven into
the fabric of the marriage -- is a vested, presently enforceable
interest and, therefore, properly included in a marital estate for
purposes of equitable division of property in divorce proceedings.
While the implications of the decision are not yet clear,
Massachusetts trusts and estates practitioners should be mindful of
this ruling in drafting estate plans and should consider whether to
amend revocable trusts to include fully discretionary standards of
distribution for clients concerned about divorce protection.
It is unclear at this point whether the husband will seek
further appellate review from the Supreme Judicial Court.
Day Pitney LLP and Looney & Grossman LLP represented the
wife on appeal. Jillian B. Hirsch of Day Pitney argued the appeal.
This article was originally published as a Day Pitney