House Held In Trust Lost Marital Asset Status

by Bryan Cave
Contact

In the afterglow of a wedding, the spouses probably don’t immediately start thinking how the bliss they feel may end spectacularly and expensively.  Chances are they may even start estate planning, thinking how they can seamlessly transfer assets to the other.  In Nelson v. Nelson, a Florida appellate court reminded us that the estate planning choices spouses make, however, have far-reaching consequences if before death they doth part.

Husband and wife bought a house together in California and titled it in both of their names.  They then transferred the home into an irrevocable trust established for the benefit of the wife and her descendants, and named the wife as the sole trustee of the trust.  Husband and wife divorced and a Florida trial court characterized the house as a marital asset subject to equitable distribution.  The Florida appellate court, however, found that the house – while originally a marital asset – lost that status once it was transferred to the irrevocable trust.

The appellate court’s decision suggested that the trial court had modified the trust to reach the equitable distribution result, so there was much analysis of trust modification.  Florida statutory trust modification would not work because statutory modification required application of the trustee or of a qualified beneficiary - not the settlor.  Surely, the trustee – the soon-to-be ex-wife – and the qualified beneficiaries – the wife and her descendants – would not want to modify the trust.  The husband, as settlor, could not petition to statutorily modify the trust even if he presented unrebutted testimony that the trust was created as an estate planning mechanism intended to protect the California home from claims made by his heirs in the event he were to predecease his wife during marriage.  Under Florida statutes, however, a settlor can petition to modify a trust that contains a mistake even if the trust is unambiguous.  There is no mention of whether the husband claimed the trust contained a mistake and modification was necessary to conform to his intent.

Similarly, the trial court could not rely on the common law to modify the trust because neither the trust nor all the beneficiaries were before the court.   Thus, the appellate court also reaffirmed that representative capacities make a difference – a concept we have seen before in Florida. The trial court could not order relief regarding the trust because the trust and all the beneficiaries were not parties to the divorce action.  If the trial court wanted to provide relief regarding the trust, then the trust along with the beneficiaries needed to be made parties to the underlying action.

The appellate court also suggested that the terms of the trust could have addressed the possibility of divorce. The trust could have terminated upon divorce. However, the court failed to consider the problems with that scenario – if the husband were to take back an interest in the asset upon termination of the trust, that would have made him a beneficiary which is likely something he did not want.

While statistics vary on the rate of divorce, many of the people who pay attention to such things place the rate between 40%-50% and the rate of divorce of subsequent marriages even higher.  When transferring assets during your life to accomplish an estate plan, the prospect of divorce is a conversation worth having with your estate planner.

[View source.]

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.

© Bryan Cave | Attorney Advertising

Written by:

Bryan Cave
Contact
more
less

Bryan Cave on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.