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What will happen to Trust assets in my Divorce?

According to this recent Daily Mail article, Athelstan Whaley, a millionaire hotel tycoon will be left practically penniless by a UK divorce court's order. Whaley claims that the main source of his wealth, a family trust, cannot be accessed to pay for his divorce settlement, despite the fact that the Judge took the trust into account when calculating the divorce payout. In order to pay the settlement, he will have to use all of his liquid assets including selling his house, and claims that this will make him homeless. While it's hard to feel bad for a millionaire, a family trust could put any divorcing spouse in this position.

In Massachusetts the division of marital property in a divorce case is controlled by M.G.L. Chapter 208 Section 34, which states in pertinent part:

"In addition to or in lieu of a judgment to pay alimony, the court may assign to either husband or wife all or any part of the estate of the other, including but not limited to, all vested and nonvested benefits, rights and funds accrued during the marriage and which shall include, but not be limited to, retirement benefits, military retirement benefits if qualified under and to the extent provided by federal law, pension, profit-sharing, annuity, deferred compensation and insurance."

This means that the Judge in a divorce case can consider how to divide all property that is in the name of either person, and this includes property held in trusts. Whether or not a trust is divisible as a marital asset depends on the type of trust and how it may have been used during the marriage.

In Ruml v. Ruml the court indicated that a trust could be martial property, especially if it was accessed during the marriage. Ruml v. Ruml, 50 Mass. App. Ct. 500, 512 (2000). In Ruml, the court elaborated that “trust assets where a spouse holds powers, such as the power of appointment of trustees, are subject to equitable distribution pursuant to M.G.L. c. 208 §34. Id.

In some instances, though, the beneficiary does not have any powers, and it is completely up to the trustees to decide how and when the property will be distributed. These are called spendthrift trusts and they may be protected in a divorce if the trust truly has been treated as a spendthrift trust.

"Trusts containing spendthrift provisions of the type under consideration in this case are recognized as valid in Massachusetts." Pemberton v. Pemberton, 9 Mass. App. Ct. 9, 19 (1980) "Moreover, in Massachusetts the settlor's intent to deny creditors of a beneficiary recovery against trust assets or recovery against the trustee's wishes has been accorded particular deference, even in the face of strong public policy arguments favoring such a recovery.’ Id. at 20. Although some scholars suggest limited authority to allow wife and dependents to pierce a spendthrift clause, there is little authority which allows a court to order a trustee to do so over the objection of the trustee. Id. See footnote 10 and 11.

The Judge in a divorce case could award other assets to offset the value of trust proceeds to one spouse, but according to Pemberton if the trust hasn't been invaded during the marriage and is a spendthrift trust than a Judge cannot order the trustees to pay assets to the beneficiary's spouse against the intent of the trust.

I've hired a Collaborative Attorney, how do I convince my spouse to hire a Collaborative Attorney too.

Collaborative Law has many advantages over litigation. It is usually far less expensive than going to trial.  When you go to court, much of your attorney's time will be spent on court strategy or on waiting to be heard in Court. Collaborative Law can help you avoid the backlog in the courts, allowing for a more expedient resolution.

In addition to these practical concerns, though, Collaborative Law offers something that the Courts do not offer: the chance to resolve your case on your terms. If you are unable to settle your case in Court a Judge, essentially a stranger who will only meet you for a very limited period of time, will make major decisions about your life. Collaborative Law is your opportunity to make these decisions together. After all, who knows what is better for you and your family than you do.

Instead of trying to convince your spouse of these advantages, we suggest that you simply request that your spouse interview an attorney who is trained in Collaborative law.  This will help them understand all of their options whether or not they choose to proceed with that attorney or the Collaborative process.  Let your spouse's attorney explain the benefits of the process.  A list of attorneys who have been trained in Collaborative Law in Massachusetts is available on the MCLC website.

Alternatively, if your spouse has shown reluctance to speak to an attorney first, you could also suggest that they speak to a Collaborative Coach.  A coach can also explain the Collaborative process and may be less intimidating than speaking to an attorney.  A list of coaches who have been trained in Collaborative Law in Massachusetts is available on the MCLC website as well.

In addition it might be helpful to tell your spouse where they can read more about Collaborative law online.  Click here to read more about the advantages of Collaborative Law or visit the MCLC website.

Finally, the MCLC Metro West Practice Group has created a brochure to help people considering the Collaborative process.  Contact Attorney Kelsey to obtain copies of the MCLC brochure.

And It's All Your Fault! MA "Fault" Based Divorce #4: Intoxication

In order to prove this "fault"-based ground for divorce, you need to convince the court that your spouse has "gross and confirmed habits of intoxication caused by voluntary and excessive use of intoxicating liquor, opium, or other drugs." The potential benefit of filing for divorce on this ground is to highlight the issue of drug or alcohol use which could also be relevant to any custody arrangement for children.

This is not to say, however, that a court would treat a case filed on "no fault" grounds any differently if one parent has an addiction that might affect his or her ability to care for the children. If custody is contested, the court will have to look at both parents to determine what is in the best interests of the children, regardless of whether the case if filed as a "no fault" divorce or a "fault"-based divorce. Because of this, along with the difficulty of proving a "gross and confirmed habit of intoxication," this ground for divorce is rarely used in favor of "no fault" divorce.