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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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The Jones court cited with approval the Colorado Court of Appeals' decision in Rosenblum,53 which held that an interest in a trust was not property for purposes of a division.54 In Rosenblum husband's mother created an irrevocable trust and designated husband and his sister as the cotrustees with authority "in their absolute discretion to distribute 'all, none or any part' of the net income and principal to any of the beneficiaries [husband and his descendants], to make unequal distributions, or to withhold all income from One or more or all.'"55 The trust instrument stated that "no beneficiary shall have any right or power to enforce the payment of principal or income to himself or any other person."56 At husband's death, the trust assets were to be divided and held in trust for the benefit of his children (or descendants of a deceased child).57

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Jones may be viewed narrowly as holding that discretionary trusts, with designs similar to the trusts reviewed in Jones and Rosenblum, are not property for purposes of C.R.S.A. section 14-10-113 and constitute mere expectancies. Yet Jones may be viewed expansively as holding that an interest in trust must be vested in a property law sense for a court to consider whether the interest constitutes property within the meaning of the statute. At this point in time, both interpretations are possible. However, if the concept of vesting is disregarded as to avoid automatic inclusion of an interest in the pool of divisible assets, disregarding the concept to avoid a rule of automatic exclusion of an interest seems equally valid.

Consider the following trust disposition:

The will of husband's mother created a trust that designated the husband as the sole trustee with the power to designate and remove successor trustees. The trust agreement states that the trustee shall distribute to husband such amounts of the trust income or principal as the trustee determines necessary or desirable for husband's health, maintenance, and support. At husband's death, the trust property shall be distributed in accordance with a power of appointment exercisable by husband in his will. The power is exercisable in favor of any person or persons except his estate, his creditors, or the creditors of his estate. To the extent such power is not exercised, the trust shall be distributed at husband's death to his descendants by representation. The trust agreement states that the needs, comfort, and welfare of husband are of primary concern to the trustee, and the interests of all other beneficiaries are secondary. The trustee may, pursuant to such guideline, exhaust the entire trust for the benefit of husband to the exclusion of all other beneficiaries. In addition, the trustee may, but need not, consider other resources available to husband when making distributions to him. As trustee, husband has distributed all the income of the trust and substantial amounts of the principal to himself. No other beneficiary has received any trust distributions.

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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