Burns & Levinson today won an important Massachusetts Supreme Judicial Court (SJC) unanimous reversal of the Appeals Court ruling in Pfannenstiehl v. Pfannenstiehl. The closely-watched divorce case focused on the issue of trust assets as marital property in divorce proceedings, and the decision overturns the Appeals Court and trial judge which required Curt Pfannenstiehl to pay his ex-wife approximately $1.4 million that was attributed to 60% of his interest in a discretionary spendthrift trust established by his father. Widely considered the biggest family law case of the year, the decision is now the definitive law on trust interests for division of marital assets in Massachusetts, and also serves as guidance for every one of the 35 plus states that use a similar equitable division statute. Burns & Levinson partner Robert J. O’Regan delivered a compelling argument to the SJC on behalf of the husband and trust beneficiary. O’Regan’s argument focused mainly on the consequences, perhaps unintended, that the Appeals Court decision could have on trust and estate law. While a full reversal of the Appeals Court on further appellate review is rare, the SJC adopted every one of O’Regan’s arguments in the case. “The key issue in this case was whether a divorce judge could order the husband to pay to his former wife nearly $1.4 million that the judge attributed to the husband’s interest in a trust that his father set up, but that the husband had no legal right to force the trust to even distribute to himself,” said O’Regan. “In reaching their decisions, the trial judge and the Appeals Court misapplied well-established trust terms in order to justify their decisions that set Massachusetts trust and estate law on its head,” he continued, “and today’s SJC’s decision corrects that very far-reaching error.” In Pfannenstiehl, both the Trial Court and the Appeals Court went to great lengths to explain how the wife could benefit, at least indirectly, from an irrevocable trust established by her soon-to-be-ex-husband’s father, even though the husband had no control over the trust and could receive distributions only at the discretion of the trustees. The husband had no present, legally enforceable interest to receive or use assets or income from the trust. The trustees’ discretion was limited to making distributions under an “ascertainable standard” for a beneficiary’s health, education, maintenance, and support. O’Regan was engaged by Curt Pfannenstiehl after the trial judge had ruled against him. There was tremendous pressure put on Mr. Pfannenstiehl to fold and not to pursue the appeal. For example, although it was clear that the client did not have and could not get the $1.4 million to pay his ex-wife, she prosecuted a contempt against him and the judge found him guilty of contempt, sentenced him to jail, and had him put in chains despite his inability to pay. The SJC decision also stated that this contempt conviction should not have been made. “The Trial Court and Appeals Court decisions failed to account for the fact that the trustees did not make distributions to the husband for most of the marriage, and that the husband received distributions only during the final two years of the marriage,” said O’Regan. “Another issue was how the value of the trust was determined. The lower courts’ decisions gave the wife 60 percent of the funds in the trust, even though the husband cannot touch the trust money.” The definition of “marital property” in Massachusetts is extraordinarily broad. Consequently, in divorce proceedings, the court may assign any part or all of a spouse’s “estate” to the other spouse. This generally may include premarital property as well as property acquired during the marriage, and may also include vested interests in an estate or trust. “Even with the broad definition of marital property in Massachusetts and the broad discretion of judges to divide up property, the SJC has now said, in no uncertain terms, that the court in Pfannenstiehl went too far because the husband’s interest in the trust was so indefinite that it could not be considered property,” added O’Regan. For additional information on this case, visit our blog, Divorce Law Monitor.