Ferri v. Powell-Ferri: A trust decanting decision that is less than meets the eye (Part II)

Charles E. Rounds, Jr.
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The Supreme Court of Connecticut (SCC) certified three trust-decanting questions of law to the Supreme Judicial Court of Massachusetts (SJC) incident to a divorce proceeding. On March 20, 2017, the SJC rendered its answers to the SCC. See Ferri v. Powell-Ferri, SJC-12070 and my JDSUPRA posting entitled "Ferri v. Powell-Ferri: A Trust decanting decision that is less than meets the eye" of the same date. This posting is a post script to my March 2017 posting. Here is the situation in a nutshell: The Husband, the beneficiary of a Massachusetts trust established by his father (Trust #1), possessed a general inter vivos power of appointment over 75% of the entrusted property. Husband and wife are the parties to a Connecticut divorce proceeding. The trustees (one of whom was the husband’s brother) decanted the property into an irrevocable trust with a spendthrift clause for the husband's benefit (Trust #2). The sole purpose of the decanting was to remove the assets of Trust #1 from the reach of the wife. As a mechanical matter, were the trustees “empowered” by the terms of the trust to decant? Yes, answered Massachusetts. But, as the concurring opinion clarifies, unasked was whether the decanted assets in Trust #2 may nonetheless be reached by the wife in an equitable action to reach and apply incident to the divorce proceeding in light of the fact that the husband had possessed a general inter vivos power of appointment at the time of the decanting. The SJC having rendered its opinion that the trustees were empowered to decant, the SCC on Aug. 8, 2017 followed up by ruling that 75% of the decanted assets was not retrievable incident to the divorce litigation, even though the husband-beneficiary had possessed a general inter vivos power of appointment over the 75% at the time of the decanting. See Ferri v. Powell-Ferri (SC 19432) (SC 19433) [Conn.]. http://cases.justia.com/connecticut/supreme-court/2017-sc19432.pdf?ts=1502107260. This October 2, 2017 JDSUPRA posting is a critique of the Connecticut court’s articulation of the applicable law.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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