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INTERESTS IN TRUSTS AS PROPERTY IN DISSOLUTION OF MARRIAGE: IDENTIFICATION AND VALUATION

Real Property, Probate and Trust Journal, Spring 2005 by Chorney, Marc A

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To date, the Colorado appellate courts have not reviewed the application of the deferred distribution or reserve jurisdiction methods in the context of a trust, but courts of other jurisdictions have.91

IV. VALUATION OF INTERESTS IN TRUSTS

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Once a court has determined that an interest in trust constitutes property for purposes of property division, another more complex analysis may be involved in determining the value of the interest. Trusts are designed to accomplish a variety of purposes, and the design of dispositive trust provisions are almost unlimited. Courts will be required to analyze not only the interests of the trust beneficiaries, but also the powers, duties, discretions, and guidelines of the trustee. The task will be challenging for a court in its review of a well-drawn trust instrument. Unfortunately, not all trust instruments are well-drawn, and a court may be required first to construe the meaning of an ambiguous document before assigning a value. In addition, valuation of interests in trusts may require a trial court to consider matters extrinsic to the trust instrument and the marriage that typically are not considered in a proceeding for a dissolution of marriage or legal separation.

A. Colorado Law

To date, the Colorado decisions have provided only general guidance as to methods of valuing interests in trusts. As discussed below, the appellate decisions do, however, vest broad discretion in the trial court to determine appropriate valuation methods.

B. Jones and Balanson

As previously discussed, Jones92 held that a beneficiary's interest in the principal of the trust did not constitute the separate property of a spouse for purposes of division under C.R.S.A. section 14-10-113. In the dissenting opinion in Jones, one justice stated that he would have treated the increase in the value of the trust assets during the marriage as marital property.93 Acknowledging that apportioning the increase in the value of a trust may be difficult, the dissenting opinion stated that trial courts are faced with valuation difficulties every day. The dissent stated:

As in the case of valuing prospective pension payments, a court can employ any of several alternatives. One alternative might [be] to place a value on [the beneficiary's] interest in the increased value of the trust corpus by utilizing a table similar to that for valuing a remainder interest for purposes of estate taxes. Another alternative might consist of ordering a percentage of future funds received by the beneficiary to be paid over to the other spouse. Other alternative methods can be employed, based upon a trial court's "experience, insight and knowledge."94

Balanson II provided trial courts with similar but less specific guidance in valuing interests:

Other courts that have addressed the valuation of similar interests have suggested an approach similar to that taken when valuing pensions. Under this approach, we conclude that the trial court may consider a variety of circumstances when determining the present value of the trust, including actuarial information concerning the life expectancy of [the beneficiary holding the current possessory interest in the trust] and information concerning the probability and extent to which [the beneficiary holding the current possessory interest] will need to invade principal for [the beneficiary's] maintenance.95

INTERESTS IN TRUSTS AS PROPERTY IN DISSOLUTION OF MARRIAGE: IDENTIFICATION AND VALUATION

Real Property, Probate and Trust Journal, Spring 2005 by Chorney, Marc A

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