USA – MASSACHUSETTS Trends and Developments Contributed by: Caterina S Wurman and Madeline R Pelagalli, Fitch Law Partners LLP
In other words, the question still rests on the particular facts and merit on a case-by-case basis. However, a recent decision by the Massachusetts Appeals Court, Jones v Jones (103 Mass App Ct 223 (2023)), sug ‑ gests that Probate and Family Court judges should be leaning towards including more and more beneficial trust interests in the marital estate when a trust ben‑ eficiary is getting a divorce. In the Jones case, the wife’s mother had established a trust, of which the wife (her daughter) and the wife’s brother were the sole beneficiaries. Upon the mother’s death, the assets held by the trust were to be divided into equal shares that were placed in separate trusts for the benefit of the wife and her brother. This provision was the apparent tipping point, as the court tried to determine whether the wife’s beneficial interest was fixed enough to be considered an enforce ‑ able right, or whether it was a mere expectancy and thus too remote and speculative for inclusion in the marital estate. The court determined that the former argument held more sway, even though the wife had never received a distribution from the trust, the trust had a spendthrift provision, the trust was irrevocable, and the trustee had sole and absolute discretion as to whether or not to make distributions in any amounts. Contrary to prior cases, the class of beneficiaries was closed, the mandatory distribution upon the mother’s death was enforceable, and any power that the trustee had to postpone any distributions to the mother was limited by law and the terms of the trust itself. She also had the power of appointment. Due to these factors, the court thus concluded that the trust was includible in the marital estate, assigned the value of the trust in its entirety to the wife, and ordered an offsetting pay ‑ ment to the husband. Many families establish trusts as estate-planning vehi ‑ cles. Some of the trusts are designed to “protect” fam ‑ ily assets in the event of a divorce. That said, current case trends suggest the court has been putting less weight on protections that estate planners put in place to keep certain assets out of the marital estate, such as spendthrift provisions, irrevocability, trustee discretion, and whether or not the trustees have made distribu‑ tions. The parties must be prepared for the possibility
that the intent of the trust’s settlor will be ignored and the value of the trust (if not the trust interest itself) will be included in the marital estate and be subject to division. What remains true, however, is that the decision- makers are still charged with making judgments on a piecemeal basis, based on the specific facts of the case and the particular attributes of the trusts at issue. If a divorcing spouse has a beneficial interest in a trust, a careful analysis is needed to determine the most equitable result, and the strategy that best aligns with a client’s needs. Prenuptial and Postnuptial Agreements Prenuptial agreements are widely used in Massachu ‑ setts as a protective measure for wealthy and high net worth individuals if a marriage ends in divorce. Often, prenuptial agreements are requested in order to safeguard premarital assets, inherited and gifted wealth, or closely held business interests. Unlike most other jurisdictions, Massachusetts does not delineate in a divorce what constitutes the marital estate by determining whether a divorcing spouse’s property was acquired during – versus before – the marriage. With no prenuptial agreement, a court con ‑ siders as part of the marital estate and subject to equi ‑ table division all property owned by each of the par ‑ ties, whether held individually or jointly, and regardless of whether the property was obtained before or after the parties got married. Therefore, prenuptial agree ‑ ments can serve to limit which categories of assets can be equitably divided in the case of divorce, and can also predetermine in what proportion each cat ‑ egory of assets is equitably divided (if at all). In the event of a divorce, prenuptial agreements can also be used to establish whether or under what cir ‑ cumstances one spouse will pay alimony to the other, and how the amount will be calculated or paid. Prenuptial agreements may also be drafted to sup ‑ port an individual’s estate-planning goals by providing for a waiver of certain rights a spouse acquires upon marriage to the other spouse’s estate in the event of death, or by ensuring a portion of one spouse’s estate is preserved so it can ultimately be left to children of a prior marriage or other family members.
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