Levitan v. Rosen

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18-P-847 Appeals Court

AMY LEVITAN vs. DANIEL J. ROSEN
(and a consolidated case1).

No. 18-P-847.

Norfolk. February 8, 2019. - May 6, 2019.

Present: Green, C.J., Agnes, & Desmond, JJ.

Divorce and Separation, Division of property, Child support.
Trust, Spendthrift provision, Distribution, Power of
appointment, Trustee's discretion. Power of Appointment.
Parent and Child, Child support.

Complaint for divorce filed in the Norfolk Division of the
Probate and Family Court Department on November 4, 2013.

Civil action commenced in the Norfolk Division of the
Probate and Family Court Department on November 6, 2014.

The cases were heard by George F. Phelan, J., and judgment
was entered by him.

L. Richard LeClair, III, for the wife.
Dana Alan Curhan for the husband.

1 Daniel J. Rosen vs. Amy Levitan & others.
 2

GREEN, C.J. The former wife (wife) is a beneficiary of a

discretionary family trust (trust) settled by her father, which

contains a spendthrift provision. Following a six-day trial, a

judge of the Probate and Family Court issued a judgment of

divorce nisi that, among other things, (1) treated the wife's

"right" to annually withdraw five percent of her share of the

trust principal as a marital asset subject to equitable

distribution under G. L. c. 208, § 34, (2) excluded from the

marital estate the remainder of the wife's trust interest on the

basis that it is governed by the trust's spendthrift provision,

and (3) included the wife's annual five percent trust principal

withdrawals as income for purposes of child support.2 The wife

appeals. We conclude that the wife's entire interest in the

trust, including her annual right to withdraw trust principal,

is governed by the trust's spendthrift provision. We further

conclude that the wife's entire interest in the trust is part of

the marital estate for purposes of § 34, and must be assigned to

the wife exclusively in light of the spendthrift provision, and

that bonuses earned by the former husband (husband) must be

considered in the calculation of child support. Accordingly, we

2 The divorce judgment also disposed of a separate equity
action filed by the former husband in which he sought a
declaratory judgment regarding the trust. The wife filed
separate notices of appeal in the divorce and equity actions;
the appeals were consolidated in this court.
 3

vacate the portions of the judgment relating to property

division and child support, and remand for further proceedings

consistent with this opinion.3

Background. 1. The trust. The trust was established by

the wife's father in 1984 and expressly provides that it is

governed by Florida law. Pursuant to the terms of the trust,

upon the death of the wife's father in 2007, the trust property

was divided into three shares, which were set apart for the wife

and each of her two siblings. The wife's share will continue to

be held in trust for her lifetime, with the remainder

distributed to her issue after her death.4 The wife's share is

managed by two trustees: the wife and Joblin Younger, an

independent, nonbeneficiary trustee (independent trustee).

Though the trust grants the independent trustee "sole

discretion" to distribute "as much of the income and principal"

to the wife as he "deems advisable," the trust expressly

provides the wife with "the right" to annually withdraw five

percent of the principal of her share (right of withdrawal).

3 In her appeal, the wife also contends that the judge's
finding that the trust gives the wife an independent power of
appointment, not subject to the discretionary control of the
trustee, was erroneous. That finding has no bearing on the
judgment, and we need not -- and do not -- consider it.

4 The remaindermen of the wife's share will receive their
distributions once there is no living child of the wife under
age twenty-five.
 4

The trust provides that, once the wife has notified the

independent trustee of her desire to exercise her right of

withdrawal, the independent trustee "shall make such

distribution to [the wife]." The wife exercised her right of

withdrawal in 2014 (receiving $96,588), 2015 (receiving $90,104)

and 2016 (receiving $84,279).5 The trust also grants the wife a

limited power of appointment, giving her the power to direct

principal and income from her share for the benefit of the

grantor's issue (which includes the wife's children). The

wife's right of withdrawal and limited power of appointment are

both set forth in Article VII of the trust.

Article XV of the trust is a spendthrift provision

prohibiting the distribution of the wife's share to creditors

and other third parties (including a spouse). To that end, the

trust authorizes the independent trustee "to withhold any

payment or distribution of income or principal (even though such

payment or distribution is otherwise required hereunder) if the

[independent trustee] in [his] sole discretion deems that such

payment or distribution would not be subject to full enjoyment

by the [wife]."

2. The divorce proceedings. The wife filed a complaint

for divorce in 2013, after sixteen years of marriage. During

5 During those years, the withdrawals were shared equally
between the husband and wife pursuant to an order of the court.
 5

the marriage, the husband worked full time, while the wife

worked sporadically, as she was principally responsible for

homemaking and raising the parties' five children. Both parties

were employed at the time of the divorce trial. At that time,

the husband was earning an annual base salary of $191,984 and

was eligible to receive bonuses of up to fifteen percent of his

salary,6 and the wife was earning an annual salary of $69,004.

At the time of the divorce, the parties' assets were the

husband's 401(k) plan, worth $127,637; the wife's trust share,

which was worth over $1.67 million as of October, 2016; and bank

accounts and other personalty of relatively modest value.7

The central issue at trial was whether the wife's trust

share was includable in the marital estate for purposes of

equitable distribution under G. L. c. 208, § 34. The wife

contended that her share was not includable because the

spendthrift provision barred distributions to third parties,

including the husband. The trial judge disagreed in part,

ruling that the wife's annual right of withdrawal was not

governed by the spendthrift provision and was therefore

6 The husband received bonuses in 2013 ($2,700), 2014
($3,906), 2015 ($18,257), and 2016 ($17,353).

7 The wife's share of the trust is comprised of $1,028,539
in stocks, mutual funds, and bonds, along with real property
valued at $645,000. The real property consists of a house
purchased by the trust in 2008, which the wife currently
occupies rent-free.
 6

includable in the marital estate, while the remainder of her

trust share "was not a marital asset subject to division."

Pursuant to the divorce judgment, the wife received her annual

right of withdrawal under the trust, the husband received his

401(k), and the husband was ordered to pay weekly child support

of $107 to the wife. In calculating child support, the judge

included the wife's right of withdrawal as income to her, and

excluded the husband's annual bonuses on the ground that they

fluctuated and were not guaranteed. The present appeal by the

wife followed.

Discussion. 1. Spendthrift provision. To determine the

scope of the spendthrift provision of the trust, we look to

Florida law. When interpreting the provisions of a trust, the

guiding principle is "to determine the intention of the settlor

and give effect to his wishes." Gilbert v. Gilbert, 447 So. 2d

299, 301 (Fla. Dist. Ct. App. 1984). "If the trust language is

unambiguous, the settlors' intent as expressed in the trust

controls and the court cannot resort to extrinsic evidence."

Roberts v. Sarros, 920 So. 2d 193, 195 (Fla. Dist. Ct. App.

2006). "This intention should not be determined by isolated

words and phrases but rather the instrument as a whole should be

considered and the testator's general plan ascertained." First

Nat'l Bank of Fla. v. Moffett, 479 So. 2d 312, 313 (Fla. Dist.

Ct. App. 1985). "[W]here there is ambiguity or uncertainty
 7

arising from the language used, construction of the instrument

is necessary." Id. "In construing the instrument, words should

be given their ordinary and usual meaning." Id. "Florida has a

public policy favoring spendthrift provisions in trusts and

protecting a beneficiary's trust income . . . ." Berlinger v.

Casselberry, 133 So. 3d 961, 966 (Fla. Dist. Ct. App. 2013).8

Here, any uncertainty in the meaning or operation of the

spendthrift provision can be attributed to the facial conflict

between the wife's right of withdrawal and the independent

trustee's discretion under the spendthrift provision to withhold

"any payment or distribution of income or principal (even though

such payment or distribution is otherwise required hereunder)."

The judge concluded that the spendthrift provision does not

apply to the wife's right of withdrawal because the spendthrift

provision encompasses only a "payment or distribution," and

makes no mention of a "withdrawal." However, though termed a

"withdrawal," the sentence of Article VII detailing the

procedure required to request such a withdrawal reads in full as

follows: "Such right of withdrawal shall be exercised in each

case by the [wife] notifying the Trustee in writing to that

effect, specifying the cash or assets at current market value

which [she] desires to withdraw; and promptly thereafter the

8 We note that Florida law appears to be consistent with
Massachusetts law in all material respects on this question.
 8

Trustee shall make such distribution to [her]" (emphasis added).

This language makes it clear that any funds withdrawn pursuant

to the right of withdrawal are "distributions," and accordingly

are not excluded from the application of the spendthrift

provision. Furthermore, this interpretation is consistent with

the settlor's express intent: "It is the primary intent of this

Article . . . that the [wife] shall be primarily provided for

and that the Trustee shall distribute no amounts to any person

other than the [wife] unless the Trustee determines that [her]

welfare will not be unreasonably jeopardized, taking into

account all other resources available to [her]."9

The judge's reliance on In re Brown, 303 F.3d 1261, 1263-

1264, 1266-1268 (11th Cir. 2002), and Miller v. Kresser, 34 So.

3d 172, 175 (Fla. Dist. Ct. App. 2010), is misplaced. In Brown,

supra at 1266, the United States Court of Appeals for the

Eleventh Circuit stated that "Florida law will not protect

assets contained within a spendthrift trust to the extent the

settlor creates the trust for her own benefit, rather than the

benefit of another." As such, the case stands simply for the

proposition that a trust created for the sole benefit of the

settlor will not be effective to shield assets held by the trust

9 Despite the husband's contentions, this language
explicitly applies to all the distributions detailed in all of
Article VII of the trust, which includes the right of withdrawal
provision.
 9

from creditors of the settlor. It is inapposite to the

circumstances of the present case, as the trust was established

by the wife's father and not by the wife herself. In Miller,

supra, the District Court of Appeal stated that "[c]ourts have

invalidated spendthrift provisions where a trust provides a

beneficiary with express control to demand distributions from

the trust or terminate the trust and acquire trust assets." As

we have discussed above, the language of the trust expressly

gives the independent trustee the discretion to withhold the

funds otherwise subject to the wife's right of withdrawal, and

indeed instructs the independent trustee to do so in

circumstances where a distribution would be exposed to creditors

of the beneficiary. The judge's conclusion that the wife's

right of withdrawal was not subject to the spendthrift provision

was erroneous.

2. Equitable distribution under G. L. c. 208, § 34. A

party's estate for purposes of equitable distribution under

G. L. c. 208, § 34, "includes all property to which a party

holds title, however acquired." Pfannenstiehl v. Pfannenstiehl,

475 Mass. 105, 110 (2016), quoting Williams v. Massa, 431 Mass.

619, 625 (2000). "Whether a trust may be included in the . . .

marital estate requires close examination of the particular

trust instrument to determine whether the interest is a 'fixed

and enforceable' property right, . . . or 'whether the party's
 10

interest is too remote or speculative' to be included."

Pfannenstiehl, supra at 111-112, quoting D.L. v. G.L., 61 Mass.

App. Ct. 488, 496-497, 499 (2004). "The question turns 'on the

attributes' of the specific trust at issue, rather 'than on

principles of general application,' . . . and therefore requires

evaluation of the facts and circumstances of each case."

Pfannenstiehl, supra at 112, quoting Lauricella v. Lauricella,

409 Mass. 211, 216 (1991). "[W]hile a judge is not necessarily

precluded from including within the marital estate for § 34

purposes a party's beneficial interest in a discretionary

trust," D.L. v. G.L., supra at 496-497, "[i]nterests in

discretionary trusts generally are treated as expectancies and

as too remote for inclusion in a marital estate, because the

interest is not 'present [and] enforceable'; the beneficiary

must rely on the trustee's exercise of discretion, does not have

a present right to use the trust principal, and cannot compel

distributions." Pfannenstiehl, supra. "If an interest in a

trust is determined after such examination to be speculative or

remote rather than fixed and enforceable, and thus more properly

characterized as an expectancy, the interest is to be considered

under the G. L. c. 208, § 34, criterion of 'opportunity of each

[spouse] for future acquisition of capital assets and income.'"

Id., quoting Williams v. Massa, supra at 629. "Whether [a

party's] interest in the trust property is part of his estate
 11

for purposes of [G. L. c. 208,] § 34[,] is a question of law

that we are in as good a position as the probate judge to

answer." Lauricella, supra at 213.

Here, the wife's share of the trust vested upon the death

of her father in 2007. However, as discussed above, the wife's

entire share is governed by the trust's spendthrift provision.

In ruling that the spendthrift-controlled portion of the wife's

share was a mere expectancy rather than a marital asset under

§ 34, the trial judge emphasized the absence of an

"ascertainable standard" guiding the trustee's exercise of

discretion. See Pfannenstiehl, 475 Mass. at 113

("'ascertainable standard' . . . limits the discretion of the

trustee, who is obligated to make distributions with an eye

toward maintaining the beneficiary's standard of living in

existence at the time the trust was created").

However, the mere fact that a trustee's discretion is

"uncontrolled" (i.e., not governed by an ascertainable standard)

does not necessarily preclude a trust's inclusion in the marital

estate. See Davidson v. Davidson, 19 Mass. App. Ct. 364, 371-

372 (1985). Indeed, in Pfannenstiehl, supra at 113-115, the

inquiry did not turn on whether the trust contained an

ascertainable standard. Rather, the Supreme Judicial Court held

that the husband's interest in a discretionary trust was a mere

expectancy because the class of beneficiaries was open
 12

(rendering the husband's one-eleventh interest susceptible to

future reduction), and the trust was clearly intended to benefit

multiple generations. Id. Similarly, in D.L., 61 Mass. App.

Ct. at 497, we held that the husband's beneficial interest in a

discretionary trust was not includable under § 34 because

"payments from principal to the beneficiaries [were] to be made,

if at all, in the 'uncontrolled' discretion of the trustees,"

"in the thirty-eight year history of the trust, there ha[d]

never been a distribution of principal from the trust to the

husband," and the trust "[wa]s generational in nature," designed

to "benefit the long-term (not near term) needs of the

beneficiaries" (which included "not only the husband but his

issue and [their] spouses").

Here, by contrast, the wife's share of the trust is not

susceptible to reduction (as she is the sole beneficiary of her

share presently held in trust), the beneficiary class is closed,

and the "primary intent" of the trust is to provide for the wife

rather than for subsequent generations.10 Accordingly, the

wife's trust interest in this case is sufficiently

distinguishable from those deemed mere expectancies in

10The trust expressly provides that "[i]t is the primary
intent of this [trust] . . . that the [wife] shall be primarily
provided for" and "the Trustee shall have no liability in
favoring [the wife] over, or to the complete exclusion of, the
remaindermen of this share."
 13

Pfannenstiehl and D.L. Moreover, though the independent

trustee's discretion is not guided by an ascertainable standard,

there is some degree of predictability built into the trust by

virtue of the wife's annual right to withdraw five percent of

the trust principal, albeit subject to the spendthrift

provision.11

We therefore conclude that the wife's trust interest may

properly be considered an asset subject to equitable

distribution under § 34. See S.L. v. R.L., 55 Mass. App. Ct.

880, 883-884 & n.10 (2002) (wife's one-fifth remainder interests

in four trusts were includable in marital estate, as

remaindermen classes were fixed for those trusts); Comins v.

Comins, 33 Mass. App. Ct. 28, 30 (1992) (wife's vested

beneficial interest in discretionary trust with closed

beneficiary class was includable in marital estate); Davidson,

19 Mass. App. Ct. at 371-372 (husband's remainder interest in

father's testamentary trust, which granted trustees

"uncontrolled discretion" and contained spendthrift provision,

was part of marital estate because husband's remainder interest

was fixed at time of father's death, despite that value of

11 It appears the trustee may only withhold the annual
withdrawal if it violates the spendthrift provision, and "the
existence of a spendthrift provision alone does not bar
equitable [distribution] of a trust." Pfannenstiehl, 475 Mass.
at 115.
 14

interest was uncertain). See also Lauricella, 409 Mass. at 216-

217 (husband's vested, one-half beneficial interest in trust was

includable under § 34 as husband occupied two-family house owned

by trust, beneficiary class was closed, and husband only had to

outlive trust's natural termination date to receive share of

trust property). Because the judge here did not include the

wife's entire trust share in the marital estate when assigning

property under § 34, the portion of the divorce judgment

pertaining to property division must be vacated and remanded.

Though the wife's share of the trust is includable in the

marital estate, it may only be assigned to the wife in light of

the spendthrift provision. Accordingly, the wife's trust share

shall be distributed exclusively to the wife, and the

distribution of the remaining marital assets is left to the

judge's discretion after considering the relevant § 34 factors

on remand. See Davidson, supra at 373.

3. Child support. In light of the intertwined nature of

the property division and child support determinations made by

the judge, the child support component of the divorce judgment

must be vacated and remanded as well. We nevertheless briefly

touch upon some of the issues that are likely to arise on remand

in connection with child support. In determining the parties'

respective incomes for purposes of child support, the judge

included the wife's right of withdrawal and excluded the
 15

husband's bonuses. The definition of "income" under the

Massachusetts Child Support Guidelines (2018) (Guidelines) is

broad, expressly including "bonuses" and interest income from

trusts. See Guidelines § I-A. To the extent the judge declined

to consider the husband's bonuses based solely on their

fluctuating, nonguaranteed nature, rather than on criteria

identified in the Guidelines,12 this was an abuse of discretion.

Moreover, while the judge is not necessarily prohibited, as a

matter of law, from treating the wife's receipt of trust

principal (which has been assigned to her in the property

division) as a stream of income for purposes of child support,

the judge should "look to the equities of the situation"; in

doing so, the judge's task is to determine whether it is

"possible . . . to identify separate portions of a given asset

of a divorcing spouse as the separate bases of the property

assignment and any . . . support obligations (thus avoiding

redistribution by . . . [a] support order of specific assets

that already have been equitably assigned)" (citations omitted).

12We do not suggest the judge is required to award child
support based on the husband's bonus income. The judge may, in
his discretion, decline to award child support on any additional
income above the first $250,000 of the parties' combined
available income, see Guidelines § II-C, and may also deviate
from the minimum presumptive order required by the Guidelines,
see Guidelines § IV. However, in exercising such discretion,
the judge must demonstrate his consideration of appropriate
criteria. See id. (circumstances supporting deviation). See
also Guidelines, Principles.
 16

Fehrm-Cappuccino v. Cappuccino, 90 Mass. App. Ct. 525, 528 nn.4,

5 (2016).

Conclusion. The portions of the divorce judgment

pertaining to property division and child support, and the

declarations appearing in paragraph 10 of the judgment, are

vacated, and the matter is remanded for further proceedings

consistent with this opinion. The judgment is otherwise

affirmed. The temporary child support order in effect prior to

the entry of the divorce judgment shall be reinstated and remain

in place during the pendency of the remand.

So ordered.