Discretionary Support Trust is Not an Asset of the Beneficiary on Divorce

In its opinion in Tannen v. Tannen, 3 A.3d 1229 (2010), the New Jersey Superior court reversed in part the lower court’s order regarding equitable distribution, alimony, and child support. The wife is the beneficiary of an irrevocable trust created by her parents. The trustees have sole discretion to make distributions for the beneficiary’s “health, support, maintenance, education, and general welfare.” The trust states that under no circumstances may the beneficiary compel a distribution and the trust includes a spendthrift provision.

Relying on Restatement (Third) of Trusts § 50, the divorce court had taken the wife’s interest in the trust into account in determining the amount of alimony awarded. The appellate court reversed, holding that the established law of New Jersey was stated by Restatement (Second) of Trusts §§ 128 and 155 which state that the beneficiary of a discretionary or support trust cannot compel the trustee to make distributions. The court stated that only the New Jersey Supreme Court could adopt the different rule of Restatement (Third) § 50.

Special thanks to William P. LaPiana (Rita and Joseph Solomon Professor of Wills, Trusts,and Estates, New York Law School) for bringing this to my attention.