Discretionary Spendthrift Trust Is Subject To Equitable Distribution In Divorce

In dividing property on divorce, Massachusetts is one of the very few common law marital property states that does not draw a distinction between separate and marital property. Accordingly, a spouse’s interest in a trust created by a family member of that spouse with the family member’s assets is part of the marital estate subject to division on divorce if the spouse’s interest is not too remote or speculative or purely discretionary.

In Pfannenstiehl v. Pfannenstiehl, 37 N.E.3d 15 (Mass. App. Ct. 2015), a divided Massachusetts intermediate appellate court affirmed the trial court’s inclusion of one spouse’s interest in a trust created by that spouse’s father. The trust terms stated the trustee “shall” make distributions in such amounts as the trustee may decide “in its sole discretion” to provide for the “comfortable support, health, maintenance, welfare and education” of all of the settlor’s descendants. The trustees made substantial regular distributions to the settlor’s three children but ceased making distributions to the spouse on the eve of the divorce. This pattern of distributions coupled with the ascertainable standard showed that the spouse had a present, enforceable interest in the trust which must be included in the marital estate.

Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.