Massachusetts and the Spendthrift Trust
The Massachusetts Appeals Court has done it again. It has disregarded and casually cast aside one of the most important well-settled and commonly used principals of trust law – the spendthrift trust – in order to justify its decision in a divorce case involving a ‘third party” trust (one settled by someone other than the beneficiary). Four years ago, the same court gained national attention when it held that a husband’s fractional share of assets in an irrevocable spendthrift trust established by his father for the husband and ten other beneficiaries should be treated as part of the marital estate for purposes of equitable division. On appeal to the Supreme Judicial Court, the highly criticized ruling was reversed. In the subject case, the Appeals Court again felt it could justify its similarly aggressive holding on the basis that this time there was only one (lifetime) beneficiary of the irrevocable spendthrift trust in question rather than eleven. Thus, the beneficiary’s interest in the trust was more than an “expectancy”, and despite decades of law upholding the spendthrift provision, that would justify disregarding the spendthrift provision and treating the entire trust fund as a “marital asset subject to equitable division”
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