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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
5. Assuming the trust instrument allows for discretionary distributions, how might a history of discretionary distributions of principal affect valuation?
6. What are the "other contingencies" mentioned in Mohrlang for a trial court to consider?109
As many questions as Mohrlang raises, it may provide one bright line rule. Regardless of whether the beneficiary is entitled to mandatory income distributions and discretionary distributions of principal, the trial court at least must consider if the interest in the trust should be discounted to its present value for the period of time until the interest becomes possessory.
D. In re Marriage of Dale
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In Dale the Colorado Court of Appeals affirmed the trial court's valuation of a remainder interest that was, according to the court, similar to the remainder interest of the B trust in Balanson II.110 The trial court valued the marital appreciation in wife's interest at $313,962 and awarded husband $120,867.50 of that amount. One-half of the amount was to be paid within sixty days after the death of wife's father (the current beneficiary), and the other half was to be paid after the death of wife's mother.111 The trial court discounted the interest to present value by applying a six percent discount rate.112 The court based the term of the present value calculation on the mortality table in C.R.S.A. section 13-25-103.113
Wife argued that the valuation was defective because the valuation was not based on expert testimony, no rationale for the discount rate was provided, and the discount rate did not account sufficiently for the mother's usufructuary interest, trustee fees, tax liabilities, market changes in the value of trust principal, or capital gains tax due on trust distribution. The court rejected those arguments and held that the trial court's calculations were reasonable based on the limited information from which the trial court could determine value.114
E. Extrinsic Matters
Depending upon the terms of the trust instrument, potential matters subject to discovery include the trust assets, prior trust distributions, accountings and tax returns of the trust, and the age, health, and financial resources (including other trusts) of beneficiaries of the trust who possess beneficial interests that precede or exist concurrently with the beneficial interest of the divorcing or separating spouse. A more subjective analysis may be involved when the holder of a power of appointment, trustee power, or trust protector power could exercise such power to the detriment of a divorcing or separating spouse, assuming that such a power does not render the interest too remote to constitute property.
F. Other Jurisdictions
Other states have addressed valuation of interests in trusts, and the methods of valuation have been diverse and, in some instances, not well reasoned. The following discussion is a sample of methods employed by various jurisdictions.
In McCain v. McCain,115 husband possessed remainder interests in two tracts of farmland subject to life estates of one aunt for one tract and another aunt for the second tract. The court valued husband's remainder interest as it would have been valued for federal estate tax purposes, which is a present value calculation.116
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