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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
Does Jones require that the trust be excluded as property for purposes of C.R.S.A. section 14-10-113?58
Whether a bundle of rights and powers in a discretionary trust, though technically not equating to a vested interest, might, in the aggregate, amount to a property interest subject to division is undetermined at this time. As discussed, some courts apparently have moved in that direction,59 but the author believes it is too early to predict that such a view represents a growing trend in the law.
H. Trust as Economic Circumstance and Trust Income as Gift
Jones also held that wife's interest, though not property, should be considered as an "economic circumstance."60 As discussed infra Part II.J., the enabling statute provides that:
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"[P]roperty" and an "asset of a spouse" shall not include any interest a party may have as an heir at law of a living person or any interest under any donative third party instrument which is amendable or revocable, including but not limited to third-party wills, revocable trusts, life insurance, and retirement benefit instruments, nor shall any such interests be considered as an economic circumstance or other factor.61
Jones may be the basis of a dichotomy regarding economic circumstance. If the trust is not amendable or revocable, the trust may be considered as an economic circumstance, but if amendable or revocable, the trust cannot be considered as an economic circumstance. The statute does not define the terms "amendable or revocable" and, as discussed infra Part II.J., a beneficiary's power of appointment or a trustee's amendment power possibly could render the trust amendable or revocable. If this is the case, the statute may have overruled legislatively the portion of the Jones court's holding that required the trust to be considered an economic circumstance.
Finally, Jones can be cited for the proposition that income distributed from a discretionary trust is a "gift" within the meaning of C.R.S.A. section 14-10-113(2).62
I. In re Marriage of Guinn
In re Marriage of Guinn63 held that property for purposes of C.R.S.A. section 14-10-113 should not include a spouse's income interest in an irrevocable trust. In Guinn, husband's parents created an irrevocable generation-skipping trust.64 Husband was entitled to the net income from the trust, which was to be distributed at least annually. Discretionary distributions of trust principal to husband were permitted if such payments were reasonably necessary for husband's health, maintenance, support, and education. Upon husband's death, the principal was to remain in trust for the benefit of husband's descendants. Husband had no power of appointment with respect to the trust. Husband's parents were the trustees of the trust. Specifically, the trust instrument allowed the trustee to determine, in the trustee's reasonable discretion, what was principal and what was income of the trust. The trust instrument allowed the trustee to allocate capital gains to income. Testimony established that capital gains had been allocated to the principal, and interest and dividend income had been allocated to the income interest during the entire term of the trust.65
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