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

Dale78 held that wife's remainder interest in an irrevocable trust created by her grandfather constituted property within the meaning of C.R.S.A. section 14-10-113. The court determined that wife's interest was indistinguishable from the remainder interest in Balanson.79

Wife contended that she held the remainder interest by virtue of being an "heir at law"80 of her living father. Because C.R.S.A. section 14-10-113(7)(b) excludes "any interest a party may have as an heir at law of a living person,"81 the remainder interest, according to wife, was not property. The court noted that the definition of an "heir" is "a person who, under the laws of intestacy, is entitled to receive an intestate decedent's property."82 The court reasoned that wife held her remainder interest in the trust not as an heir at law under the laws of intestacy, but as a vested beneficiary of an irrevocable trust.83

Although the court stated that it need not consider any other interpretive aids, the opinion then added:

The legislative history shows that § 14-10-113(7)(b) was adopted to overturn the holding in In re Marriage of Gorman, supra, that a vested remainder interest in a revocable or modifiable trust is a property interest subject to division. Speakers on behalf of the bill specifically referenced the Gorman decision and explained that subsection (7)(b) was drafted as a noncompromise measure to accomplish a complete reversal of that holding. The speakers also clearly advised that the statutory change did not address the holding in In re Marriage of Balanson, supra, and was not intended to change the classification of remainder interests in irrevocable trusts as property subject to division. . . . Hearings on S.B. 02-160 before the Senate Judiciary Committee and the House Judiciary Committee, 63rd General Assembly, Second Regular Session (Jan. 9, 2002).84

Perhaps C.R.S.A. section 14-10-113(7)(b) could have been more explicit, but in this author's opinion, criticism of the statutory revision is undeserved. The amendment overruled the Gorman decision that was, in the author's opinion, clearly wrong. The amendment succeeded in its primary objective, and any uncertainty created by the statute is minor relative to the problem that it cured.

III. THE PENSION ANALOGY

To view the development of the law regarding pensions and interests in trusts as parallel and analogous is tempting and, indeed, the analogy may be appropriate in some respects. For example, interests in pensions and trusts may be vested or unvested, and the enjoyment of the benefits may be defeated by the death of the participant or beneficiary.85 However, pensions and interests in trusts can be incongruous in other respects. Some interests in trusts, though vested, may be decreased or eliminated by powers of appointment, distributions to other beneficiaries, and payment of death taxes due upon the death of a current beneficiary of the trust. Other interests, though not vested, may give the beneficiary such a degree of control and enjoyment of the trust property that, when considered as a whole, the bundle of powers and rights is the practical equivalent of ownership of the trust property.