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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
In the author's opinion, Balanson II and the dissent in Jones provide trial courts with the following guidance in valuation:
1. A trial court may value beneficial interests in trusts in the same actuarial manner utilized for federal transfer tax purposes.96
2. A trial court may order that a percentage of trust distributions received by the beneficiary's spouse subsequent to a legal separation or dissolution of the marriage be paid to the nonbeneficiary spouse.97
3. A trial court may utilize other unspecified valuation methods based upon the court's "experience, insight and knowledge."98
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4. A trial court may consider a variety of circumstances, including actuarial information, concerning the life expectancy of other beneficiaries of the trust, and the extent to which other beneficiaries of the trust eligible for distributions may require principal distributions.99 Impliedly, an invasion power exercisable in favor of a non-spouse beneficiary may be quantified in the calculation of the beneficiary spouse's interest.
C. In re Marriage of Mohrlang
In re Marriage of Mohrlang100 concerned husband's interest in an irrevocable trust that was "not modifiable."101 The trust principal consisted of stock in a closely-held corporation, which had appreciated since the date of the marriage.102 Income of the trust was required to be distributed to husband at least quarterly, and principal distributions to husband could be made to him for his health, maintenance, support, and education, within the discretion of the trustee. Husband's interest would terminate if he predeceased his parents, in which case his share would be divided among his children and the descendants of any of his deceased children. Apparently, the trust principal would be distributed to husband upon his parents' deaths. No other person held an interest in the trust that preceded or existed concurrently with husband's interest in the trust.103
The trial court did not discount to present value husband's interest in the trust. At issue on appeal was whether the trial court erred in failing to discount the interest to its present value.104 The court of appeals held that the trial court "should have considered actuarial information concerning the life expectancy of husband's parents and . . . the likelihood that the trustee would invade the trust corpus in the future."105 The trial court was reversed and the case was remanded to "reconsider whether the value of husband's trust interest . . . should be discounted by an appropriate rate because of the delay in husband's receiving his interest, the possibility of forfeiture, and other contingencies."106
Mohrlang raises the following questions:
1. How is an appropriate discount rate determined?107
2. What tables are used in determining life expectancy of a measuring life?
3. Should the analysis be limited to actuarial tables or should other factors such as the actual health of a measuring life (e.g., the parents of husband) be considered?
4. Does the possibility of husband's death prior to his parents' death reduce the value of the interest in the trust?108
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