Levitan v. Rosen

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18-P-847 Appeals Court
AMY LEVITAN vs. DANIEL J. ROSEN
(and a consolidated case1).
No. 18-P-847.
Norfolk. February 8, 2019. - May 6, 2019.
Present: Green, C.J., Agnes, & Desmond, JJ.
Divorce and Separation, Division of property, Child support.
Trust, Spendthrift provision, Distribution, Power of
appointment, Trustee's discretion. Power of Appointment.
Parent and Child, Child support.
Complaint for divorce filed in the Norfolk Division of the
Probate and Family Court Department on November 4, 2013.
Civil action commenced in the Norfolk Division of the
Probate and Family Court Department on November 6, 2014.
The cases were heard by George F. Phelan, J., and judgment
was entered by him.
L. Richard LeClair, III, for the wife.
Dana Alan Curhan for the husband.
1 Daniel J. Rosen vs. Amy Levitan & others.
2
GREEN, C.J. The former wife (wife) is a beneficiary of a
discretionary family trust (trust) settled by her father, which
contains a spendthrift provision. Following a six-day trial, a
judge of the Probate and Family Court issued a judgment of
divorce nisi that, among other things, (1) treated the wife's
"right" to annually withdraw five percent of her share of the
trust principal as a marital asset subject to equitable
distribution under G. L. c. 208, § 34, (2) excluded from the
marital estate the remainder of the wife's trust interest on the
basis that it is governed by the trust's spendthrift provision,
and (3) included the wife's annual five percent trust principal
withdrawals as income for purposes of child support.2 The wife
appeals. We conclude that the wife's entire interest in the
trust, including her annual right to withdraw trust principal,
is governed by the trust's spendthrift provision. We further
conclude that the wife's entire interest in the trust is part of
the marital estate for purposes of § 34, and must be assigned to
the wife exclusively in light of the spendthrift provision, and
that bonuses earned by the former husband (husband) must be
considered in the calculation of child support. Accordingly, we
2 The divorce judgment also disposed of a separate equity
action filed by the former husband in which he sought a
declaratory judgment regarding the trust. The wife filed
separate notices of appeal in the divorce and equity actions;
the appeals were consolidated in this court.
3
vacate the portions of the judgment relating to property
division and child support, and remand for further proceedings
consistent with this opinion.3
Background. 1. The trust. The trust was established by
the wife's father in 1984 and expressly provides that it is
governed by Florida law. Pursuant to the terms of the trust,
upon the death of the wife's father in 2007, the trust property
was divided into three shares, which were set apart for the wife
and each of her two siblings. The wife's share will continue to
be held in trust for her lifetime, with the remainder
distributed to her issue after her death.4 The wife's share is
managed by two trustees: the wife and Joblin Younger, an
independent, nonbeneficiary trustee (independent trustee).
Though the trust grants the independent trustee "sole
discretion" to distribute "as much of the income and principal"
to the wife as he "deems advisable," the trust expressly
provides the wife with "the right" to annually withdraw five
percent of the principal of her share (right of withdrawal).
3 In her appeal, the wife also contends that the judge's
finding that the trust gives the wife an independent power of
appointment, not subject to the discretionary control of the
trustee, was erroneous. That finding has no bearing on the
judgment, and we need not -- and do not -- consider it.
4 The remaindermen of the wife's share will receive their
distributions once there is no living child of the wife under
age twenty-five.
4
The trust provides that, once the wife has notified the
independent trustee of her desire to exercise her right of
withdrawal, the independent trustee "shall make such
distribution to [the wife]." The wife exercised her right of
withdrawal in 2014 (receiving $96,588), 2015 (receiving $90,104)
and 2016 (receiving $84,279).5 The trust also grants the wife a
limited power of appointment, giving her the power to direct
principal and income from her share for the benefit of the
grantor's issue (which includes the wife's children). The
wife's right of withdrawal and limited power of appointment are
both set forth in Article VII of the trust.
Article XV of the trust is a spendthrift provision
prohibiting the distribution of the wife's share to creditors
and other third parties (including a spouse). To that end, the
trust authorizes the independent trustee "to withhold any
payment or distribution of income or principal (even though such
payment or distribution is otherwise required hereunder) if the
[independent trustee] in [his] sole discretion deems that such
payment or distribution would not be subject to full enjoyment
by the [wife]."
2. The divorce proceedings. The wife filed a complaint
for divorce in 2013, after sixteen years of marriage. During
5 During those years, the withdrawals were shared equally
between the husband and wife pursuant to an order of the court.
5
the marriage, the husband worked full time, while the wife
worked sporadically, as she was principally responsible for
homemaking and raising the parties' five children. Both parties
were employed at the time of the divorce trial. At that time,
the husband was earning an annual base salary of $191,984 and
was eligible to receive bonuses of up to fifteen percent of his
salary,6 and the wife was earning an annual salary of $69,004.
At the time of the divorce, the parties' assets were the
husband's 401(k) plan, worth $127,637; the wife's trust share,
which was worth over $1.67 million as of October, 2016; and bank
accounts and other personalty of relatively modest value.7
The central issue at trial was whether the wife's trust
share was includable in the marital estate for purposes of
equitable distribution under G. L. c. 208, § 34. The wife
contended that her share was not includable because the
spendthrift provision barred distributions to third parties,
including the husband. The trial judge disagreed in part,
ruling that the wife's annual right of withdrawal was not
governed by the spendthrift provision and was therefore
6 The husband received bonuses in 2013 ($2,700), 2014
($3,906), 2015 ($18,257), and 2016 ($17,353).
7 The wife's share of the trust is comprised of $1,028,539
in stocks, mutual funds, and bonds, along with real property
valued at $645,000. The real property consists of a house
purchased by the trust in 2008, which the wife currently
occupies rent-free.
6
includable in the marital estate, while the remainder of her
trust share "was not a marital asset subject to division."
Pursuant to the divorce judgment, the wife received her annual
right of withdrawal under the trust, the husband received his
401(k), and the husband was ordered to pay weekly child support
of $107 to the wife. In calculating child support, the judge
included the wife's right of withdrawal as income to her, and
excluded the husband's annual bonuses on the ground that they
fluctuated and were not guaranteed. The present appeal by the
wife followed.
Discussion. 1. Spendthrift provision. To determine the
scope of the spendthrift provision of the trust, we look to
Florida law. When interpreting the provisions of a trust, the
guiding principle is "to determine the intention of the settlor
and give effect to his wishes." Gilbert v. Gilbert, 447 So. 2d
299, 301 (Fla. Dist. Ct. App. 1984). "If the trust language is
unambiguous, the settlors' intent as expressed in the trust
controls and the court cannot resort to extrinsic evidence."
Roberts v. Sarros, 920 So. 2d 193, 195 (Fla. Dist. Ct. App.
2006). "This intention should not be determined by isolated
words and phrases but rather the instrument as a whole should be
considered and the testator's general plan ascertained." First
Nat'l Bank of Fla. v. Moffett, 479 So. 2d 312, 313 (Fla. Dist.
Ct. App. 1985). "[W]here there is ambiguity or uncertainty
7
arising from the language used, construction of the instrument
is necessary." Id. "In construing the instrument, words should
be given their ordinary and usual meaning." Id. "Florida has a
public policy favoring spendthrift provisions in trusts and
protecting a beneficiary's trust income . . . ." Berlinger v.
Casselberry, 133 So. 3d 961, 966 (Fla. Dist. Ct. App. 2013).8
Here, any uncertainty in the meaning or operation of the
spendthrift provision can be attributed to the facial conflict
between the wife's right of withdrawal and the independent
trustee's discretion under the spendthrift provision to withhold
"any payment or distribution of income or principal (even though
such payment or distribution is otherwise required hereunder)."
The judge concluded that the spendthrift provision does not
apply to the wife's right of withdrawal because the spendthrift
provision encompasses only a "payment or distribution," and
makes no mention of a "withdrawal." However, though termed a
"withdrawal," the sentence of Article VII detailing the
procedure required to request such a withdrawal reads in full as
follows: "Such right of withdrawal shall be exercised in each
case by the [wife] notifying the Trustee in writing to that
effect, specifying the cash or assets at current market value
which [she] desires to withdraw; and promptly thereafter the
8 We note that Florida law appears to be consistent with
Massachusetts law in all material respects on this question.
8
Trustee shall make such distribution to [her]" (emphasis added).
This language makes it clear that any funds withdrawn pursuant
to the right of withdrawal are "distributions," and accordingly
are not excluded from the application of the spendthrift
provision. Furthermore, this interpretation is consistent with
the settlor's express intent: "It is the primary intent of this
Article . . . that the [wife] shall be primarily provided for
and that the Trustee shall distribute no amounts to any person
other than the [wife] unless the Trustee determines that [her]
welfare will not be unreasonably jeopardized, taking into
account all other resources available to [her]."9
The judge's reliance on In re Brown, 303 F.3d 1261, 1263-
1264, 1266-1268 (11th Cir. 2002), and Miller v. Kresser, 34 So.
3d 172, 175 (Fla. Dist. Ct. App. 2010), is misplaced. In Brown,
supra at 1266, the United States Court of Appeals for the
Eleventh Circuit stated that "Florida law will not protect
assets contained within a spendthrift trust to the extent the
settlor creates the trust for her own benefit, rather than the
benefit of another." As such, the case stands simply for the
proposition that a trust created for the sole benefit of the
settlor will not be effective to shield assets held by the trust
9 Despite the husband's contentions, this language
explicitly applies to all the distributions detailed in all of
Article VII of the trust, which includes the right of withdrawal
provision.
9
from creditors of the settlor. It is inapposite to the
circumstances of the present case, as the trust was established
by the wife's father and not by the wife herself. In Miller,
supra, the District Court of Appeal stated that "[c]ourts have
invalidated spendthrift provisions where a trust provides a
beneficiary with express control to demand distributions from
the trust or terminate the trust and acquire trust assets." As
we have discussed above, the language of the trust expressly
gives the independent trustee the discretion to withhold the
funds otherwise subject to the wife's right of withdrawal, and
indeed instructs the independent trustee to do so in
circumstances where a distribution would be exposed to creditors
of the beneficiary. The judge's conclusion that the wife's
right of withdrawal was not subject to the spendthrift provision
was erroneous.
2. Equitable distribution under G. L. c. 208, § 34. A
party's estate for purposes of equitable distribution under
G. L. c. 208, § 34, "includes all property to which a party
holds title, however acquired." Pfannenstiehl v. Pfannenstiehl,
475 Mass. 105, 110 (2016), quoting Williams v. Massa, 431 Mass.
619, 625 (2000). "Whether a trust may be included in the . . .
marital estate requires close examination of the particular
trust instrument to determine whether the interest is a 'fixed
and enforceable' property right, . . . or 'whether the party's
10
interest is too remote or speculative' to be included."
Pfannenstiehl, supra at 111-112, quoting D.L. v. G.L., 61 Mass.
App. Ct. 488, 496-497, 499 (2004). "The question turns 'on the
attributes' of the specific trust at issue, rather 'than on
principles of general application,' . . . and therefore requires
evaluation of the facts and circumstances of each case."
Pfannenstiehl, supra at 112, quoting Lauricella v. Lauricella,
409 Mass. 211, 216 (1991). "[W]hile a judge is not necessarily
precluded from including within the marital estate for § 34
purposes a party's beneficial interest in a discretionary
trust," D.L. v. G.L., supra at 496-497, "[i]nterests in
discretionary trusts generally are treated as expectancies and
as too remote for inclusion in a marital estate, because the
interest is not 'present [and] enforceable'; the beneficiary
must rely on the trustee's exercise of discretion, does not have
a present right to use the trust principal, and cannot compel
distributions." Pfannenstiehl, supra. "If an interest in a
trust is determined after such examination to be speculative or
remote rather than fixed and enforceable, and thus more properly
characterized as an expectancy, the interest is to be considered
under the G. L. c. 208, § 34, criterion of 'opportunity of each
[spouse] for future acquisition of capital assets and income.'"
Id., quoting Williams v. Massa, supra at 629. "Whether [a
party's] interest in the trust property is part of his estate
11
for purposes of [G. L. c. 208,] § 34[,] is a question of law
that we are in as good a position as the probate judge to
answer." Lauricella, supra at 213.
Here, the wife's share of the trust vested upon the death
of her father in 2007. However, as discussed above, the wife's
entire share is governed by the trust's spendthrift provision.
In ruling that the spendthrift-controlled portion of the wife's
share was a mere expectancy rather than a marital asset under
§ 34, the trial judge emphasized the absence of an
"ascertainable standard" guiding the trustee's exercise of
discretion. See Pfannenstiehl, 475 Mass. at 113
("'ascertainable standard' . . . limits the discretion of the
trustee, who is obligated to make distributions with an eye
toward maintaining the beneficiary's standard of living in
existence at the time the trust was created").
However, the mere fact that a trustee's discretion is
"uncontrolled" (i.e., not governed by an ascertainable standard)
does not necessarily preclude a trust's inclusion in the marital
estate. See Davidson v. Davidson, 19 Mass. App. Ct. 364, 371-
372 (1985). Indeed, in Pfannenstiehl, supra at 113-115, the
inquiry did not turn on whether the trust contained an
ascertainable standard. Rather, the Supreme Judicial Court held
that the husband's interest in a discretionary trust was a mere
expectancy because the class of beneficiaries was open
12
(rendering the husband's one-eleventh interest susceptible to
future reduction), and the trust was clearly intended to benefit
multiple generations. Id. Similarly, in D.L., 61 Mass. App.
Ct. at 497, we held that the husband's beneficial interest in a
discretionary trust was not includable under § 34 because
"payments from principal to the beneficiaries [were] to be made,
if at all, in the 'uncontrolled' discretion of the trustees,"
"in the thirty-eight year history of the trust, there ha[d]
never been a distribution of principal from the trust to the
husband," and the trust "[wa]s generational in nature," designed
to "benefit the long-term (not near term) needs of the
beneficiaries" (which included "not only the husband but his
issue and [their] spouses").
Here, by contrast, the wife's share of the trust is not
susceptible to reduction (as she is the sole beneficiary of her
share presently held in trust), the beneficiary class is closed,
and the "primary intent" of the trust is to provide for the wife
rather than for subsequent generations.10 Accordingly, the
wife's trust interest in this case is sufficiently
distinguishable from those deemed mere expectancies in
10The trust expressly provides that "[i]t is the primary
intent of this [trust] . . . that the [wife] shall be primarily
provided for" and "the Trustee shall have no liability in
favoring [the wife] over, or to the complete exclusion of, the
remaindermen of this share."
13
Pfannenstiehl and D.L. Moreover, though the independent
trustee's discretion is not guided by an ascertainable standard,
there is some degree of predictability built into the trust by
virtue of the wife's annual right to withdraw five percent of
the trust principal, albeit subject to the spendthrift
provision.11
We therefore conclude that the wife's trust interest may
properly be considered an asset subject to equitable
distribution under § 34. See S.L. v. R.L., 55 Mass. App. Ct.
880, 883-884 & n.10 (2002) (wife's one-fifth remainder interests
in four trusts were includable in marital estate, as
remaindermen classes were fixed for those trusts); Comins v.
Comins, 33 Mass. App. Ct. 28, 30 (1992) (wife's vested
beneficial interest in discretionary trust with closed
beneficiary class was includable in marital estate); Davidson,
19 Mass. App. Ct. at 371-372 (husband's remainder interest in
father's testamentary trust, which granted trustees
"uncontrolled discretion" and contained spendthrift provision,
was part of marital estate because husband's remainder interest
was fixed at time of father's death, despite that value of
11 It appears the trustee may only withhold the annual
withdrawal if it violates the spendthrift provision, and "the
existence of a spendthrift provision alone does not bar
equitable [distribution] of a trust." Pfannenstiehl, 475 Mass.
at 115.
14
interest was uncertain). See also Lauricella, 409 Mass. at 216-
217 (husband's vested, one-half beneficial interest in trust was
includable under § 34 as husband occupied two-family house owned
by trust, beneficiary class was closed, and husband only had to
outlive trust's natural termination date to receive share of
trust property). Because the judge here did not include the
wife's entire trust share in the marital estate when assigning
property under § 34, the portion of the divorce judgment
pertaining to property division must be vacated and remanded.
Though the wife's share of the trust is includable in the
marital estate, it may only be assigned to the wife in light of
the spendthrift provision. Accordingly, the wife's trust share
shall be distributed exclusively to the wife, and the
distribution of the remaining marital assets is left to the
judge's discretion after considering the relevant § 34 factors
on remand. See Davidson, supra at 373.
3. Child support. In light of the intertwined nature of
the property division and child support determinations made by
the judge, the child support component of the divorce judgment
must be vacated and remanded as well. We nevertheless briefly
touch upon some of the issues that are likely to arise on remand
in connection with child support. In determining the parties'
respective incomes for purposes of child support, the judge
included the wife's right of withdrawal and excluded the
15
husband's bonuses. The definition of "income" under the
Massachusetts Child Support Guidelines (2018) (Guidelines) is
broad, expressly including "bonuses" and interest income from
trusts. See Guidelines § I-A. To the extent the judge declined
to consider the husband's bonuses based solely on their
fluctuating, nonguaranteed nature, rather than on criteria
identified in the Guidelines,12 this was an abuse of discretion.
Moreover, while the judge is not necessarily prohibited, as a
matter of law, from treating the wife's receipt of trust
principal (which has been assigned to her in the property
division) as a stream of income for purposes of child support,
the judge should "look to the equities of the situation"; in
doing so, the judge's task is to determine whether it is
"possible . . . to identify separate portions of a given asset
of a divorcing spouse as the separate bases of the property
assignment and any . . . support obligations (thus avoiding
redistribution by . . . [a] support order of specific assets
that already have been equitably assigned)" (citations omitted).
12We do not suggest the judge is required to award child
support based on the husband's bonus income. The judge may, in
his discretion, decline to award child support on any additional
income above the first $250,000 of the parties' combined
available income, see Guidelines § II-C, and may also deviate
from the minimum presumptive order required by the Guidelines,
see Guidelines § IV. However, in exercising such discretion,
the judge must demonstrate his consideration of appropriate
criteria. See id. (circumstances supporting deviation). See
also Guidelines, Principles.
16
Fehrm-Cappuccino v. Cappuccino, 90 Mass. App. Ct. 525, 528 nn.4,
5 (2016).
Conclusion. The portions of the divorce judgment
pertaining to property division and child support, and the
declarations appearing in paragraph 10 of the judgment, are
vacated, and the matter is remanded for further proceedings
consistent with this opinion. The judgment is otherwise
affirmed. The temporary child support order in effect prior to
the entry of the divorce judgment shall be reinstated and remain
in place during the pendency of the remand.
So ordered.