Collins v. Collins

• Decision Date: 04 August 2017
• Docket Number: No. 2016-302,2016-302
• Citation: 2017 VT 70
• Court: Vermont Supreme Court
• Parties: Michael Collins v. Lynn B. Collins

2017 VT 70

Michael Collins v. Lynn B. Collins

No. 2016-302

Supreme Court of Vermont

March Term, 2017

August 4, 2017

NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40 as well as formal revision before publication in the Vermont Reports. Readers are requested to notify the Reporter of Decisions by email at: JUD.Reporter@vermont.gov or by mail at: Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801, of any errors in order that corrections may be made before this opinion goes to press.

On Appeal from Superior Court, Caledonia Unit, Family Division

Robert R. Bent, J.

William P. Neylon, St. Johnsbury, for Plaintiff-Appellee.

Deborah T. Bucknam of Bucknam & Black, P.C., St. Johnsbury, for Defendant-Appellant.

PRESENT: Reiber, C.J., Dooley, Skoglund, Robinson and Eaton, JJ.

¶ 1. ROBINSON, J. This case calls upon us to consider the effect in a divorce case of a grantor's amendment to a revocable trust that changed the beneficiary from husband to husband's son, thereby keeping the trust property out of the marital estate and shielding it from wife's claims. Wife appeals the family division's final property division award. In particular, she challenges the trial court's refusal to enforce a subpoena requiring grantor father to testify about the trust and his capacity to change its beneficiary and argues that the family court should have included the trust assets as part of the marital estate. We affirm.

¶ 2. The material facts are as follows. The parties married in 1984 and have two children, both of whom are now adults. The parties earned comparable incomes during their marriage. Their primary asset is their marital home, which the parties stipulated is valued at $140,000. Each party has two retirement accounts, which are roughly equal in net value after considering loans, and wife has a vested inheritance from her mother's estate of around $4000. Lastly, wife owes $16,000 for a student loan executed on behalf of the parties' son.

¶ 3. At issue in this appeal is the status of a revocable trust that husband's parents established in 1999. The parents placed their real estate properties in the trust, which included their house—located near the parties' marital home—and a camp at a lake in Barnet.¹ The parents named themselves as trustees and husband as the sole beneficiary; husband would become a successor trustee when either of his parents became unable to act as trustee. The trust document provided that the grantors could amend the trust at any time, and that upon the death of both grantors, the trust could not be amended or revoked and the trustee would distribute the trust assets to the beneficiary. The trust also contains a Certificate of Deposit (CD) that was valued at around $38,000 at the time of the last hearing and a savings account. The parties used the trust's CD to secure a $38,000 loan for themselves.

¶ 4. Father moved in with the parties following the death of husband's mother in 2011; husband and wife jointly cared for him. The parties separated in early 2014, and husband filed for divorce in April of that year. About two years after the parties separated, husband moved into his parents' house with father. Father's health declined over the course of the divorce proceedings. When the family court held a status conference in January 2015, father was living in a rehabilitation center.

¶ 5. At that January 2015 status conference, the parties discussed the parents' revocable trust and considered the relevance of this Court's decision in Billings v. Billings, 2011 VT 116, ¶ 23, 190 Vt. 487, 35 A.3d 1030, and the Legislature's subsequent amendment of 15 V.S.A. § 751(b)(8) in response to the Billings decision. Shortly thereafter, in February 2015, with thehelp of an attorney, father signed an amendment to the trust that changed the sole beneficiary of the revocable trust from husband to the parties' son.

¶ 6. In July 2015, shortly before the first day of the contested final hearing,² wife filed two subpoenas: one to be served upon the rehabilitation center where father was living, requiring production of father's medical records, and the second to be served upon father, requiring him to testify in the upcoming final divorce hearing. Husband filed motions to quash both subpoenas. The court apparently did not resolve the motions at the first day of the contested divorce hearing, and took them up on the second day of the contested final hearing, in March 2016. By that time, a lawyer for father had entered an appearance and moved on father's behalf to quash the subpoenas. After taking some testimony, the court granted the motions to quash.

¶ 7. The court quashed the subpoena for father's medical records on the basis of father's doctor-patient privilege. The court rejected wife's argument that husband's procurement of a letter concerning father's health from a doctor at the rehabilitation facility amounted to a waiver of father's doctor-patient privilege because the court concluded, after taking evidence, that father himself had not actually authorized this disclosure.

¶ 8. Regarding the subpoena wife served upon father, the court relied on 15 V.S.A. § 751(b)(8)(C)(ii), which provides that third parties to a divorce shall not be required to provide documentation or testify about their "revocable estate planning instruments," unless a party to the divorce has an interest in the trust that is vested and not capable of modification or divestment. The court rejected wife's argument that the trust was not "capable of modification or divestment" because father did not have the testamentary capacity to amend the trust—an assertion she contended father's testimony would support. The court noted the difference between competence and testamentary capacity, as well as the ebbs and flows in cognitive capacity that often accompanydementia. Concluding that the Legislature did not intend for courts to try to sort through these issues concerning a third party's testamentary capacity in connection with a revocable trust, the court interpreted the statute to be referring to the nature of the trust, and not to the mental state of the grantor. Because the grantor was still alive, the trust in this case was still capable of modification.

¶ 9. The court closed the evidence at the conclusion of the March 2016 hearing. Father died in April 2016 and wife moved to re-open the evidence in the divorce proceeding, arguing that his death meant that husband had acquired a significant amount of assets from the trust. The court granted wife's motion and held a hearing in June 2016.³ At the hearing, the parties primarily focused on the trust's CD and the student loan that was taken out in wife's name for the parties' son. In documents wife submitted to the court after the hearing she argued that the court should include the trust assets as part of the marital estate because the son was a nominee beneficiary of the trust assets, meaning that father named him as the sole beneficiary only to shield the assets from wife, and in the alternative that husband had equitable ownership over the trust assets.

¶ 10. The family court issued a final order in November 2016. The court considered the § 751(b) factors relevant to marital property division and concluded that the parties were roughly on equal footing: the parties' incomes were comparable, neither contributed to the vocational skills of the other, neither had significant health issues, marital fault was not an issue, and the marriage was long-term. The court did note, however, that husband is ten years older than wife and therefore has fewer income-earning years left.

¶ 11. Regarding the trust, the court declined wife's request that it treat the trust assets as part of the marital estate. It determined that the parties' son was not a nominee. The court distinguished this case from our prior cases concerning nominees by noting that, because the assetswere in a revocable trust, husband never had title to them. Furthermore, the court determined that there was no evidence of an agreement between husband and the son, by which the son would transfer the assets back to husband and which would support the conclusion that the son was a nominee. The court did not directly address the equitable ownership argument.

¶ 12. Although the court did not treat the trust assets as part of the marital estate, it did consider evidence of husband's lifestyle as impacted by the benefits he derived from the trust. The court found it significant that husband continued to live rent-free in his parents' house, which belonged to the trust, and that he had no plans to leave in the near future. Considering this factor, and wife's extensive involvement in caring for husband's family members during their marriage, the court ordered that wife would have the exclusive right to live in the marital home for nine years, but that the house would be sold if she moved out or if husband moved out of his parents' home for a period of at least fourteen months. Both parties were ordered responsible for the loan secured by the CD; if the parties sold the home, they would pay off the loan and divide the remaining equity, and if husband paid the loan within the following year, wife's right to stay in the house would terminate and the parties would sell the home and divide the equity. The court did not order any spousal maintenance. Wife appealed.

¶ 13. Wife first argues that the family court erred in granting husband's motions to quash her subpoenas because this evidence would have showed that father lacked the testamentary capacity to amend his trust. Second, she makes two arguments for why the trust assets should have been included in the marital estate. She argues that husband had full control over the trust assets before and after father's change in beneficiary and treated the property as if it were his own. Alternatively, she contends that the parties' son was a nominee, and father named him as the...