in Re Antonia Gualtieri Living Trust ( 2019 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
In re ANTONIA GUALTIERI LIVING TRUST.
LINDA ANTON, UNPUBLISHED
March 19, 2019
Petitioner-Appellant,
v No. 341816
Macomb Probate Court
MARY ANN GUALTIERI and MARIA LC No. 2016-219737-TV
CHRISTINE TORRES, Successor Co-Trustees,
Respondents-Appellees.
Before: O’BRIEN, P.J., and JANSEN and RONAYNE KRAUSE, JJ.
PER CURIAM.
Petitioner appeals as of right an opinion and order denying her petition for distribution.
We affirm.
This action arises out of petitioner’s attempts to obtain compensation for child support
and alimony arrearages owed to her by her ex-husband, Charles Anton (Anton). Anton is a
beneficiary of the trust at issue herein. Petitioner sought to compel respondents, who are the
trust’s successor co-trustees, to make income distribution payments to Anton, out of which
petitioner could then seek payment of Anton’s child support and alimony arrearages.
Petitioner argues that the probate court erred by denying her petition for distribution
based on a finding that the trust is a purely discretionary trust, and that she is not entitled to
compensation for Anton’s outstanding child support and alimony arrearages out of income
distributions made to Anton from the trust. We disagree.
This Court “review[s] the . . . interpretation of the trust agreement de novo, as a question
of law.” In re Estate of Herbert Trust, 303 Mich. App. 456, 458; 844 NW2d 163 (2013).
Additionally, “this Court reviews de novo the language used in wills and trusts as a question of
law.” In re Estate of Reisman, 266 Mich. App. 522, 526; 702 NW2d 658 (2005).
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Petitioner and respondents disagree regarding the type of trust that is at issue herein.
Petitioner argues that the trust is a support or spendthrift trust, and respondents argue that the
trust is a discretionary trust. “Under a discretionary trust, the trustee may pay to the beneficiary
as much of the income or principal as the trustee in his discretion determines to be appropriate.”
In re Johannes Trust, 191 Mich. App. 514, 517; 479 NW2d 25 (1991). Conversely, under a
support trust, “the trustee shall pay so much of the income and such amounts of principal as the
trustee deems proper for . . . support, maintenance, and welfare.” Miller v Dep’t of Mental
Health, 432 Mich. 426, 428; 442 NW2d 617 (1989). Trusts with spendthrift provisions
“provid[e] that the beneficiary’s interest shall not be transferable or subject to the claims of
creditors,” unless the spendthrift provision allows ordinary creditors to reach trust assets. Id.
The key difference between discretionary trusts, support trusts, and spendthrift trusts, for
petitioner’s purposes, is that creditors, including petitioner, “cannot compel the trustee [of a
discretionary trust] to pay any part of the income or principal in order that the creditors may be
paid,” In re Johannes, 191 Mich. App. at 517, because “the beneficiary has no ascertainable
interest in the assets,” In re Hertsberg Inter Vivos Trust, 457 Mich. 430, 433; 578 NW2d 289
(1998). The opposite is true of spendthrift and support trusts, which allow trust assets to be
reached to satisfy creditors, including creditors seeking to satisfy claims for child support and
alimony. Good v Armstrong, 218 Mich. App. 1, 7-8; 554 NW2d 14 (1996); see also Coverston v
Kellogg, 136 Mich. App. 504, 513; 357 NW2d 705 (1984) (holding that income from spendthrift
and support trusts can be used to satisfy claims for child support and alimony).
Petitioner and respondents contest the meaning of the following language from the trust
document:
The Trustee, in its sole and absolute discretion, shall apply to, or for the benefit of
CHARLES ANTON as much of the net income from the trust as the Trustee
deems advisable for his education, health, maintenance, and support.
* * *
The Trustee, in its sole and absolute discretion, shall apply to, or for the benefit of
CHARLES ANTON as much of the principal from the trust as the Trustee deems
advisable for his education, health, maintenance, and support.
Petitioner argues that the use of the word “shall” in the terms of the trust indicates that the trust is
a support or spendthrift trust, whereas respondents argue that the use of the words “sole and
absolute discretion” indicate that the trust is a discretionary trust. In support of her argument,
petitioner explains that the word “shall” suggests that respondents are mandated to pay income
and principal for Anton’s maintenance and support. Petitioner states that the provision would be
discretionary only if it contained permissive phrasing, such as the word “may,” which would
more clearly suggest that the trust is discretionary. Petitioner is correct that the word “shall”
typically denotes a mandatory provision. Wilcoxon v Detroit Election Comm, 301 Mich. App.
619, 631; 838 NW2d 183 (2013). However the word “shall” is immediately preceded by the
words “sole and absolute discretion,” indicating that the trust is discretionary.
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“A court must ascertain and give effect to the settlor’s intent when resolving a dispute
concerning the meaning of a trust.” In re Herbert, 303 Mich. App. at 458. “[T]he settlor’s intent
regarding the purpose of the trust’s creation and its operation, are determined by examining the
trust instrument.” In re Kostin, 278 Mich. App. 47, 53; 748 NW2d 583 (2008). This Court is
tasked with the responsibility of “attempt[ing] to construe the [trust] instrument so that each
word has meaning.” Id. This Court must examine the trust document as a whole, and carry out
the settlor’s intent “as nearly as possible.” Id.
Petitioner asks this Court to ignore all of the signs that would direct it to the conclusion
that the trust is discretionary in favor of an analysis that only takes into consideration the
function of the word “shall,” which implies that respondents are subject to a mandatory directive
to make income distributions when read out of context. At several intervals, the trust document
states that respondents, as trustees, are permitted to use their “sole and absolute discretion” in
applying any part of the trust income or principal for Anton’s benefit, indicating that it is a
discretionary trust, and not a spendthrift or support trust. The trust document also contains the
following provisions, which specifically apply to Anton:
Guidelines for Discretionary Distributions
To the extent that the Grantor has given the Trustee any discretionary authority
over the distribution of net income or principal to [Anton], it is the Grantor’s
desire that the Trustee be conservative in exercising such discretion.
In making discretionary distributions to [Anton], the Trustee shall consider other
income or resources available to [Anton] that are outside of the trust and are
known to the Trustee.
It is the grantor’s desire that the preservation of principal be a priority for
purposes of the trust and that genuine need must be shown by [Anton] before the
Trustee shall make a discretionary distribution.
Taken together with the provisions that give respondents the authority to exercise
discretion regarding distributions to Anton, it is apparent that the use of the word “shall” was not
intended to mandate that respondents authorize income distributions to Anton, from which
petitioner could recover child support and alimony arrearages. Instead, it appears that the words
“sole and absolute discretion” give respondents the right to use their discretion when deciding
whether to make distributions to Anton. Indeed, the trust document consistently states that
respondents were intended to have “sole and absolute” discretion to determine whether to make
distributions to Anton. MCL 700.7103(d), which defines discretionary trust provisions, also
provides support for the contention that the trust is discretionary:
(d) “Discretionary trust provision” means a provision in a trust, regardless of
whether the terms of the trust provide a standard for the exercise of the trustee’s
discretion . . . that provides that the trustee has discretion, or words of similar
import, to determine 1 or more of the following:
(i) Whether to distribute to or for the benefit of an individual or a class of
beneficiaries the income or principal or both of the trust.
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(ii) The amount, if any, of the income or principal or both of the trust to distribute
to or for the benefit of an individual or a class of beneficiaries.
(iii) Who, if any, among a class of beneficiaries will receive income or principal
or both of the trust.
(iv) Whether the distribution of trust property is from income or principal or both
of the trust.
(v) When to pay income or principal, except that a power to determine when to
distribute income or principal within or with respect to a calendar or taxable year
of the trust is not a discretionary trust provision if the distribution must be made.
[MCL 700.7103(d).]
The trust provisions at issue in this case give respondents discretion to determine whether to
distribute the income and principal of the trust to its beneficiaries, including Anton, as
contemplated in MCL 700.7103(d). Thus, this Court must conclude that the trust is
discretionary. Because the trust is discretionary, creditors, including petitioner, cannot reach the
trust assets. In re Hertsberg, 457 Mich. at 433.
Petitioner also argues that public policy supports the argument that she should be
compensated for Anton’s child support and alimony arrearages via income distributions from the
trust. In support of this assertion, petitioner directs this Court to Good, 218 Mich. App. at 6, in
which this Court stated:
The elements of public policy which hold that a father has a legal duty to support
his minor children outweigh the public policy that an owner of property may do
with it as he pleases by imposing spendthrift restraints on the disposition of
income from a spendthrift trust. When the noncustodial parent has the financial
means to support and maintain his own children, the source thereof is immaterial.
While the duty imposed on the parent must be fair and not confiscatory, the
parent’s duty to support his children is not limited to his income. In determining
the amount of support, in addition to income, all relevant aspects of the financial
status of the person obligated to pay support must be considered. [Id., quoting
Malnar v Malnar, 156 Mich. App. 534, 537-538; 401 NW2d 892 (1986).]
However, the caselaw cited by petitioner only applies to spendthrift trusts, not to discretionary
trusts. Thus, the success of the argument is contingent on this Court’s agreement that the trust in
question herein was a spendthrift trust. Accordingly, because the trust is a discretionary trust,
and not a spendthrift trust, petitioner’s argument must fail.
Affirmed.
/s/ Colleen A. O’Brien
/s/ Kathleen Jansen
/s/ Amy Ronayne Krause
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