New Case: Savoy v. Savoy, 97 Mass App. Ct. July 8, 2020
Marital Assets
By: Nicole Barrett
What date should be used to determine the date of the marriage termination?
Can trust income be included in the marital estate for purposes of division?
In Savoy v. Savoy, the Husband appealed the trial court decision for two determinations: (1) To determine the date to be used as the date of the marriage termination and (2) to confirm whether or not the Wife’s trust interest should be included as part of the divisible marital estate. Savoy v. Savoy, No. 19-P-1076 (Mass. App. Ct. July 8, 2020).
When trying to divide a marital estate, how does one determine the date when a marriage has ended? Is it the date the parties separated? The date of filing for divorce? Or, is it when the Court enters the divorce decree? Any of these three dates could be correct. Determining when a marriage has ended is a finding of fact to be determined by the judge. In Savoy, the lower Court determined the marriage effectively ended at the time of divorce in February 2017. On appeal, the Husband argued that the court should divide the parties’ marital assets from the time they originally separated in March 2006.
The Savoy Court looked at various factors to determine the nature of the parties’ relationship to see when their marriage had “terminated” and if the trial court judge erred in finding it to be eleven years after the parties’ separation. These factors include financial and/or emotional dependence on each other, the frequency and types of the parties’ interactions with each other, and the parties’ filing status on their tax returns.
Despite the parties living apart, the parties continued to participate in the marital relationship. The Wife had moved to Florida, however, she traveled to the marital home multiple times a year, spending alternating Christmases and most Fourth of July holidays with the Husband. The Husband also visited the Wife at her home in Florida. During these visits to Massachusetts and Florida, the parties drove together, dined together, and stayed overnight at the same residence. Moreover, the parties continued to exchange Christmas gifts until either 2012 or 2014. The Wife also continued to wear her wedding ring during the separation.
The parties often depended on each other for emotional support, by communicating their “innermost thoughts” with each other and having weekly phone conversations. Further, after their separation in March 2006, the parties continued to share finances. The Husband remained a cosigner on his Wife’s New York apartment through 2017. In addition, he gave the Wife $2,500.00 per month and paid for her credit card bills between 2006 and 2013. Financial reliance was also established due to the Husband holding health insurance through his Wife and collecting disability payments as her spouse. The parties also filed joint tax returns until 2015.
Using the above factors, the Appeals Court found that the significant evidence reflected enough of a marital relationship between the parties for the trial court judge to determine the appropriate date to use for dividing the material estate as February 2017. For this reason, the Appeals Court affirmed the lower court’s decision as to this part of the appeal.
The second part of the Husband’s appeal asks whether the lower court erred in deciding that the Wife’s interest in a trust should not be included as part of the marital estate and subject to equitable division. Discretionary trusts are generally found “too remote for inclusion in a marital estate,” however, this is not always the case. In Savoy, the Appeals Court evaluated the Wife’s trust interest by looking to see if it was an expected future acquisition, or if it was present and enforceable. To do so, the Court said, the conditions of the trust must be assessed by evaluating the trustee’s discretion, the beneficiary’s right to use the trust principal, and the beneficiary’s ability to compel distributions.
The Wife in Savoy was both a beneficiary to the trust and the trustee. She held the ability to use the trust funds at her unrestrained discretion. Specifically, the Wife c(ould) make distributions to herself in “whatever amounts of principal deemed advisable for her maintenance, education, support and health needs.”
Despite this freedom to designate funds as she saw fit, there were eight other living beneficiaries and the beneficiary class was still open. Historically, similar trusts were held to not be included as a marital asset of a beneficiary when distributions by trustees were subject to understood requirements for each beneficiary. The key difference between precedential cases and the Wife’s trust is that she is the sole trustee and “her right to receive trust income and principal is not ‘subject to the condition precedent of the trustee having first exercised [her] discretion’ in determining the needs of the trust’s open class of beneficiaries.” Further, the Wife had utilized approximately $1.39 million of the $1.8 million in principal. The trial court found that the other beneficiaries understood that the Wife lives off of the trust, which is why they have only received small amounts of the principal.
The Massachusetts Appeals Court found that the Wife’s “broad powers” over the trust made it subject to equitable distribution, despite the beneficiary class remaining open. Since the Wife had been living off of the principal amount, the trust could not be considered “mere expectancy” or even remote. The quantifiable nature of the trust combined with the Wife’s historical use and powers over the trust led the court to reverse the lower court decision and consider the trust a marital asset subject to equitable division.
Details such as determining the date when a marriage ends and whether or not a specific material asset should be included in the marital estate are very fact specific. If you have any questions about the particular nuances of your situation, please reach out for a consultation.
