We have not talked to anyone yet who is not hoping that the Supreme Judicial Court (SJC) grants further appellate review, though admittedly, we have not spoken with Mrs. Pfannenstiehl or her counsel! At this point, it is hard to imagine the high court not taking the case.
We cannot know what the SJC will do on the merits, but it is hard to envision the SJC not reversing. The case is just too wrong; and it is too public. The far more intriguing question is, will the SJC improve a highly problematic situation for the bench, bar, estate planners and divorcing clients? Or will it muddy the waters further? Today, we indulge in some educated guesswork, about what the justices may, or may not, do.
Might the SJC abandon the central tenet of Lauricella v. Lauricella, that a spendthrift provision does not bar inclusion of a trust interest in the marital estate? Unlikely. Too many other appellate cases have relied on this basic premise since 1991; and there are too many trusts that truly are disingenuous exercises in long or short-term divorce planning.
Might the court alter or clarify the meaning and significance of the ascertainable standard concept? Hopefully, yes. That a beneficiary could bring suit against a trustee for failure to distribute funds for a cause that falls within the trustee's discretion, just does not logically mean that the corpus is an open check book for the beneficiary, as the Pfannenstiehl trial and Appeals Court's have concluded. A nuanced concept demands a nuanced analysis.
Might the SJC provide guidance, for the first time, on how to value a trust interest? Possibly. It is a very tall order, but highly desirable, given the seemingly indefensible conclusion of the Appeals Court, that a beneficiary has an enforceable pro rata share of a corpus, where the trust says no such thing. The baseline premise of every valuation must be "what are we actually valuing"? This answer, which seemed so seductively easy in Lauricella (one asset, the parties' home, with two sibling beneficiaries only), was anything but for Mr. Pfannenstiehl, one of 11 beneficiaries, in a class that is subject to expansion, and with various forms of securities in the trust res.
What might guidance on the ascertainable standard and valuation look like? Would the SJC stretch to find a mechanical construct, in some way like the time formula of Baccanti v. Morton, for stock options? More, likely, in our view, the court would look to JS v. CC, on the matter of S corporation earnings in support matters, as a guiding format, perhaps placing the burden on the beneficiary to disprove a compelling nexus to the marital estate, based on a series of criteria, including, but certainly not limited to the ascertainable standard itself.
Might the SJC limit non-beneficiary recoveries to "if and when" distributions, in part because valuation is just too difficult? Maybe. This would be a conservative result to be sure, letting the proof of the beneficiary's financial access to the trust corpus and income bear the test of time. But, this would belie the caution of Dewan v. Dewan, that it is less preferable to present buyout strategies, to avoid both the continued enmeshment of the parties, and the threat of illusory recovery by reason of trustee manipulation, a la Krintzman v. Honig I.
Does Krintzman v. Honig II presage the outcome? One hint of what the SJC might do lies in its Krintzman v. Honig II, and with former Appeals Court Justice, and now SJC Justice Fernande R.V. Duffly. In Krintzman I, the Appeals Court rejected the wife's complaint that the trial judge had included her self-settled trust, of which she was the sole beneficiary, as a divisible asset; but it vacated the "if and when" judgment, accepting the husband's argument that the assigned recovery would likely prove unenforceable, and, therefore, illusory.
On remand, the Probate and Family Court complied with the appellate order by dropping the "if and when" approach, and replacing it with a lump based on the husband's assigned 20% share of the trust's corpus value. The wife appealed again; and she prevailed in Krintzman v. Honig II. The Appeals Court vacated the revised judgment, this time because the new order was inconsistent with the judge’s original findings, in which he observed the existence of a valid trust, however porously (“a private pocket”) it had been administered.
While Rule 1:28 opinions are not "authored", one member of the Krintzman v. Honig II panel was Justice Duffly, a veteran divorce lawyer and former Probate and Family Court judge. In its memorandum, the Appeals Court panel ordered the trial judge specifically to hear expert testimony, and then to establish the value of the distributions that the wife was expected to receive during her lifetime, reduced to a present value; whereupon, the court could order a lump sum buyout.
At the time, one's reaction might have been, well, how do you do that?! (Disclosure: one of us was trial and appellate counsel for Mr. Krintzman.) By retrospect, though, doesn’t Krintzman II go directly to the essence of the problem? Where "if and when" won't do, doesn't the real value of the trust interest begin, at least, with an inquiry of what the beneficiary will receive in the future? Even if unknown, or unknowable, isn't the economic significance of the trust interest to the beneficiary, the financial gain still that which s/he is, more likely than not, to receive?
Could the SJC apply to this principle generally? Maybe not, as the crystal ball may be less than reliable. Then again, is it possible that when benefits cannot be projected with some measure of reliability, because the facts don't justify it, is there any rational alternative to "if and when"?