781.708.4445

wmlevine@levinedisputeresolution.com

Divorce Mediation Blog

A Cautionary Concurrence on Decanting: Ferri v. Powell-Ferri

Wednesday, May 10, 2017

In an unusual context, the Massachusetts Supreme Judicial Court recently answered questions put to it by the Connecticut Supreme Court about its view of whether the decanting of a divorce litigant’s trust assets to another trust, with spendthrift provisions, was permitted by Massachusetts law.

The SJC concluded that the trustee’s maneuver, which likely placed the trust assets outside the equitable division reach of the non-beneficiary’s divorcing wife, respected the probable intent of the settlor, making the asset transfer permissible, even though under the original trust’s terms, the beneficiary-husband had the unfettered right to withdraw 75% of the trust res at the time of decanting.

This seems a harsh result from the spouse’s perspective. We wonder how this situation really differs from the case of a self-settled revocable trust, the contents of which are uniformly treated as unfettered marital assets because the grantor can seize the trust assets at any time; therefore, for divorce purposes, the trust is a nullity. Mr. Ferri, too, could demand and receive 75% of the original trust corpus, too, so how is that different, at least regarding that portion? Yet, the Ferri ruling will presumably put those same assets out of reach for Ms. Powell-Ferri, and the divorce court.

Did the SJC elevate form over substance?

The SJC’s answer, at the bottom line, is “no”, because the beneficiary had not in fact, taken control of the trust principal, and the trust instrument established the settlor’s intent that, the trustee’s obligations of asset protection and control persist until distribution of the trust corpus, irrespective of the beneficiary’s prior withdrawal rights.

So, as the trust instrument compelled the trustee to shield the trust corpus from others, could decant (i.e., transfer the entire trust asset base to a new, more restrictive trust) to further the settlor’s wish.

Yet, Chief Justice Gants clearly recognized, the mischief that this decision might work in Massachusetts divorce world: encouraging divorce planning by spouses and fiduciaries, and resulting disruption to the commonwealth’s generally policies in favor of broad marital asset identification and against prejudgment manipulation.

Thus, in a rare concurrence, he (with Justices Lenk and Budd) “[wrote] separately” to emphasize what the SJC did not decide:

    … whether Massachusetts law will permit trustees in Massachusetts to create a new spendthrift trust where the sole purpose of the transfer is to remove the trust’s assets from the marital assets that might be distributed to the beneficiary’s spouse in a divorce action.

    Exactly what the Ferri trustee had done in Connecticut, now blessed by the SJC.

Justice Gants girded his caution on the Massachusetts Uniform Trust Code’s prohibition against trusts that violate public policy (M.G.L., ch. 203E, §404), and common law, suggesting strongly, while not explicitly stating, that decanting for the sole purpose of divorce planning just – might – well – be such a violation. While not cited by the him, procedural rules of the Probate and Family Court, common bench and bar understanding and perhaps an ethics-based view, all support Justice Gants’ caution.

In the end, what the Ferri family and trustee got away with in Connecticut, will likely not pass muster in future Massachusetts. The Ferri concurrence may be its most influential part: a bright, flashing yellow light, with a red light against trustee divorce planning likely to follow.

 

2013 Child Support Guidelines Preview Part 2: Which Comes First? The Alimony or The Child Support?

Wednesday, July 17, 2013

In an earlier blog entry, we wondered about how various judges might apply what are arguably competing aspects of the presumptive formulae for alimony and child support. Since 2009, the Child Support Guidelines (CSG) have presumptively absorbed the first $250,000.00 of combined family income, while the Massachusetts alimony “reform” statute (eff. 3/1/12), forbids the use of dollars for alimony analysis, when they have already been exposed to CSG treatment. Since neither specifies which calculation comes first, which is the chicken and which the egg?

This is no idle wondering. Given the opposite tax impacts of alimony (taxable/deductible) and child support (not taxable/not deductible), the economic differences in the two approaches can be substantive, even substantial. We noted earlier that judges addressing lawyers’ groups about their own practices in this regard seemed open minded to hearing both sides of the equation. Meanwhile, as Greater Boston and Western Massachusetts divorce and family law mediators, we have been running the calculations both ways all along, not in an undereducated effort to mirror judicial thinking, but to help inform our clients of the differing possible economic outcomes, in seeking consensus on fair and tax-efficient family support arrangements.

The 2013 CSG resolves the question expressly, if not definitively. They state that neither approach is improper, and that under appropriate circumstances, judges may apply either approach. We applaud this approach as it maximizes flexibility, elevating inquiry and analysis over form, in the search for equity and efficiency.

 



Get e-mail notifications of new blog posts! Enter email address below.:



Delivered by FeedBurner

other articles


recent posts


tags

IRC §2704 mediator Massachusetts alimony conciliation Levine Dispute Resolution family and probate law disputes Massachusetts health coverage divorce judgment Family Law Arbitration Divorce Agreements alimony orders divorce and family law SJC mediators Major League Baseball Arbitration rehabilitative alimony Massachusetts alimony and child support Act Reforming Alimony in the Commonwealth arbitrators arbitrator divorce lawyers child support Chouteau Levine family law divorced litigation mediations Massachusetts lawyers fraud disputes high-risk methodology alimony statute Self-adjusting alimony orders dispute resolution alimony reform legislation divorce litigation alimony lawyers Boston Baseball Arbitration Levine Dispute Resolution Center mediation family law arbitrator private dispute resolution divorce arbitrators General term alimony Child Support Guidelines special master The Seven Sins of Alimony Cohabitation arbitration support orders lawyer Levine Dispute Resolutions Uniform Arbitration Act family mediation divorce arbitrator Massachusetts Lawyers Weekly MLB labor agreement divorce process Levine Dispute Resolution Center LLC medical benefits how baseball arbitration works COLA divorce mediator resolve disputes family law mediation Obamacare alimony law Massachusetts divorce lawyers family support divorce mediation lawyer-attended mediation divorce mediations divorce agreement health insurance traditional negotiations Matrimonial Arbitration divorce mediators Same Sex Marriage Defense of Marriage Act facilitated negotiations Alimony Reform Act LDRC Baseball Players family law arbitrators med/arb divorce arbitration annulment Divorce divorce and family law mediators Massachusetts divorce mediators separation Baseball Massachusetts Alimony Reform Act self-adjusting alimony pre-ARA alimony med-arb DOMA