Undistributed Income of a Spendthrift Trust is Excluded from Alimony Determinations

In a case before the Appellate Court of Connecticut, an ex-wife appealed a trial court ruling that reduced her ex-husband’s alimony obligations on the basis of her status as the beneficiary of a supplementary spendthrift trust.  The appellate court reversed the trial court ruling and remanded the case for further proceedings.

The Marriage Dissolution

In April 2002, the couple’s forty-year marriage was dissolved.  The judgment of dissolution contained provisions that required the ex-husband to pay $5,000 per month to his ex-wife as alimony, and that permitted the court to take a second look at the alimony obligation on the ex-husband’s 65th birthday or upon the death of his father, which ever occurred first.  In 2006, after both events occurred, the ex-husband filed a motion to modify his alimony obligation.

In its memorandum of decision, the court found that the ex-wife was an income beneficiary of a trust in which the settlor’s primary intent was to provide generously for her care and maintenance, commonly known as a “spendthrift trust.”  The court also found that this trust earned more than enough income to provide for the ex-wife’s care and maintenance without any invasion of the principal. On the basis of its findings regarding the ex-wife’s status as a trust beneficiary, the court granted the ex-husband’s motion and modified the ex-wife’s alimony to $1 per year, retroactive to the date the motion was served.  The ex-wife appealed the trial court decision.

Constructing a Trust Instrument

According to Connecticut case law, a court’s role in the construction of a trust instrument is to determine the meaning of what the grantor stated in the trust instrument and not to speculate upon what the grantor intended to state in the instrument. Connecticut Bank & Trust Co. v. Lyman, 148 Conn. 273, 278-79, 170 A.2d 130 (1961).  Expressed intent must control the court’s interpretation of the instrument.

Therefore, the plain language of the trust instrument itself, rather than extrinsic evidence of actual intent, is determinative of the grantors’ intent. Cooley v. Cooley, 32 Conn.App. 152, 159, cert. denied, 228 Conn. 901 (1993) (citing Heffernan v. Freedman, 177 Conn. 476, 481, 418 A.2d 895 (1979).  The provisions of the trust of which the ex-wife was a beneficiary classify it as a supplementary spendthrift trust:  “[T]he trustees shall pay to or for the benefit of [the ex-wife]… so much of the net income thereof as the Trustees, in their sole discretion, deem advisable for the comfortable maintenance of said child.”

Spendthrift Trusts

In the case of a spendthrift trust which provided the beneficiary with only such sums as the trustee deems necessary for the beneficiary’s support, no title passes in the income passes to the beneficiary until the beneficiary receives a distribution from the trust.  Bridgeport v. Reilly, 133 Conn. 31, 35–36, 47 A.2d 865 (1946), quoting Reilly v. State, 119 Conn. 508, 512, 177 A. 528 (1935).  Therefore, the appellate court determined that, until the ex-wife receives a distribution from her supplementary spendthrift trust, the undistributed trust income cannot be considered for the purposes of determining an alimony award.

Furthermore, a court can only control the exercise of discretion by the trustee of a spendthrift trust when an abuse of discretion has occurred. Zeoli v. Commissioner of Social Services, 179 Conn. 83, 89, 425 A.2d 553 (1979).  In the instant case, there has been no claim that the trustees have abused their discretion in not making distributions to the ex-wife.

The Court’s Decision

In examining the provisions of the ex-wife’s spendthrift trust, the appellate court concluded that the trial court improperly interpreted the provisions of the trust agreement when, in effect, it assumed that the trustees were obligated to distribute income to the ex-wife, in her capacity as trust beneficiary.  The court could not compel the trustees to make income payments and consider the unreceived income in modifying the alimony order.

Furthermore, it was an abuse of discretion for the court to consider the undistributed trust assets as income to the ex-wife when the court considered and applied the statutory factors for the determination of alimony.  Conn. Gen. Stat. §  46b-82. Therefore, the trial court incorrectly applied the law when it ordered the ex-wife’s alimony to be reduced because it could not reduce alimony based on a finding that the supplementary spendthrift trust earned enough to provide for the ex-wife’s support.

Because the appellate court agreed that the trial court abused its discretion by improperly crafting an order that tacitly compelled the trustees to make distributions of the trust to the ex-wife, the appellate court reversed the trial court ruling and remanded the case for further proceedings in accordance with the law.

By: Attorney Russell Sweeting

Taylor v. Taylor, 978 A.2d 538 (Conn. App. Ct. 2009)

Should you have any questions relating to trusts or other personal asset protection issues, please do not hesitate to contact Attorney Susan Maya, at SMaya@Mayalaw.com or 203-221-3100, and Joseph Maya, at JMaya@Mayalaw.com or 203-221-3100, in the Maya Murphy office in Westport, Fairfield County, Connecticut.

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