In re Marriage of Balanson, No. 03CA0765.

• Citation: 107 P.3d 1037
• Decision Date: 23 September 2004
• Docket Number: No. 03CA0765.
• Parties: In re the MARRIAGE OF Bonnie L. BALANSON, Appellant, and Richard D. Balanson, Appellee.
• Court: Court of Appeals of Colorado

107 P.3d 1037

In re the MARRIAGE OF Bonnie L. BALANSON, Appellant, and

Richard D. Balanson, Appellee.

No. 03CA0765.

Colorado Court of Appeals, Div. II.

September 23, 2004.

Certiorari Denied February 22, 2005.

Litvak, Litvak, Mehrtens, & Epstein, P.C., Steven B. Epstein, Janine C. Treu, Denver, Colorado, for Appellant.

Stevens, Littman, Biddison, Tharp & Weinberg, LLC, Andrew C. Littman, Craig A. Weinberg, Boulder, Colorado, for Appellee.

Opinion by Judge NEY.¹

Bonnie L. Balanson (wife) appeals from the revised permanent orders entered by the trial court in this dissolution action between her and Richard D. Balanson (husband). We reverse and remand for reconsideration.

I.

The primary issue in this appeal relates to the value of the marital appreciation of wife's remainder interest in a trust at the time of the dissolution of marriage.

A trust (the master trust) was created during the marriage in 1976 by wife's parents and reserved to them the power to alter, amend, or revoke the trust until one of them died. Wife's mother died in 1990, at which time the master trust became irrevocable and was divided into Trust A and Trust B. Under the trust instrument, wife's father was to pay the net income from Trusts A and B to himself during his lifetime, had discretion to invade the trust corpus for his support, care, and maintenance, and was to invade the corpus of Trust A before Trust B.

Upon his death, any portion of the corpus of Trust A that wife's father did not devise through his will would go into Trust B. The trustee was required to then divide Trust B for the benefit of wife and her living siblings.

In 1997, the trial court entered permanent orders as part of the dissolution of marriage between wife and husband. The trial court determined that wife's interest in the master trust was a vested remainder subject to divestment if she predeceased her father, that the interest was wife's separate property, but that any appreciation thereof during the marriage constituted marital property. The trial court determined half of the trust would be distributed to wife so long as her father predeceases her, valued such portion at $650,000, and awarded it in full to wife.

Wife appealed the property distribution and maintenance award, and a division of this court affirmed in part, reversed in part, and remanded the case with directions. In re Marriage of Balanson, 996 P.2d 213 (Colo.App.1999) (Balanson I).

The supreme court granted certiorari to, as relevant here, "determine the appropriate treatment in a dissolution of marriage case of ... future interests in family trusts" and an issue relating to maintenance. In re Marriage of Balanson, 25 P.3d 28, 32 (Colo.2001)(Balanson II).

The supreme court held that although the father could invade the corpus for his own support, care, and maintenance after the mother's death, that power only rendered wife's irrevocable remainder interest uncertain but did not convert it into a mere expectancy. Thus the supreme court concluded that wife's irrevocable remainder interest was separate property and the appreciation thereof during the marriage constituted marital property subject to division.

The supreme court also held that "[s]uch appreciation is to be calculated by determining the extent to which the property's present value at the time of the decree exceeds its value at the time of acquisition." Balanson II, supra,25 P.3d at 42 (emphasis added). Consequently, the supreme court ruled that the trial court erred because it determined that the marital property subject to division was the entire present value at the time of the decree and not the extent to which the present value exceeds the value at the time of acquisition. Thus, the supreme court ordered that on remand, the trial court should "calculate the trust's appreciation, by determining the extent to which the trust's present value at the time of the decree exceeded its value at the time it was created." Balanson II, supra,25 P.3d at 42-43 (emphasis added). In footnote six of its opinion, the court concluded that the trial court could consider a variety of circumstances when determining the present value of the trust, "including actuarial information concerning the life expectancy of Wife's father and information concerning the probability and extent to which the father will need to invade principal for his maintenance." Balanson II, supra,25 P.3d at 43 n. 6.

The parties and we agree that the supreme court's mandate was not a final order.

On remand, the trial court conducted three days of hearings in April and May 2002. In March 2003, the trial court issued revised permanent orders.

However, in June 2002, after the hearing but prior to the trial court's ruling, the General Assembly enacted § 14-10-113(7)(b) and (c), C.R.S.2003. Colo. Sess. Laws 2002, ch. 270 at 1054-55.

Section 14-10-113(7)(b) provides that "[f]or purposes of subsections (1) to (4) of this section only, `property' and `an asset of a spouse' shall not include ... any interest under any donative third party instrument which is amendable or revocable, including but not limited to ... revocable trusts." The purpose of this amendment was to reverse completely the decision by a division of this court in In re Marriage of Gorman, 36 P.3d 211 (Colo.App.2001), that an interest in a revocable trust constituted property for purposes of division in a dissolution proceeding. See In re Marriage of Dale, 87 P.3d 219 (Colo.App.2003)

.

Section 14-10-113(7)(c) provides the following concerning the effective date of the amendment:

(I) The provisions of this subsection (7) shall apply to all causes of action filed on or after July 1, 2002. The provisions of this subsection (7) shall also apply to all causes of action filed before said date in which a final property disposition order concerning matters affected by this subsection (7) was not entered prior to July 1, 2002.

(II) For purposes of this paragraph (c), "final property disposition order" means a property disposition order for which the time to appeal has expired or for which all pending appeals have been finally concluded.

In its March 2003 findings of fact and conclusions of law, the trial court did not consider § 14-10-113(7)(b) or (c). The court found that the master trust was funded in 1976 with the home owned by wife's father, which then had a fair market value of $170,000, plus cash he had on hand, and that no additional assets had been added to the trust corpus. The trial court also concluded that when wife's mother died in 1990, the master trust was divided into Trust A, in which wife had only an expectancy interest, and Trust B, the corpus of which consisted solely of the home. The trial court concluded that wife's vested remainder interest in Trust B constituted property and had a value of $900,000 in 1997, when the decree of dissolution was entered.

Applying the subtraction method, the trial court determined that the trust appreciated in value during the marriage in the amount of $730,000 and that wife's fifty-percent share of that increase, as one of two beneficiaries, was $365,000.

The court found that the home would probably appreciate at roughly the same rate for which it might otherwise be discounted, that the possibility wife would predecease her eighty-year-old father was negligible, and that the father should have no need to invade the corpus of Trust B because he maintained long-term health insurance and would first invade the corpus of Trust A.

The trial court thus concluded that the value of the trust should not be depreciated based on the remaining life expectancy of wife's father or his right to invade the corpus for his own benefit and that it would be equitable to divide equally the net increase in value of wife's separate trust interest between the parties.

Accordingly, the trial court ordered wife to make an equalization payment to husband of $151,298 upon her father's death.

In reconsidering the prior award of maintenance, the trial court considered the changes in circumstances since 1997, including the fact that wife sold the former marital residence in May 1998 and that the parties' daughter became emancipated and left for college in May 1999. The court concluded that wife's reasonable monthly needs of $12,500 at the time of the decree were reduced to $7370 in May 1999 and to $6854 in 2002, but should include $1000 per month for retirement savings until wife reaches the age of sixty-two.

After considering the changes in the parties' incomes, the court awarded wife maintenance of $8700 for the period from October 1997 through May 1999, $3000 per month from June 1999 through March 2002, and $1000 per month thereafter until she reaches the age of sixty-two.

II.

Wife first contends the trial court erred as a matter of law by failing to apply § 14-10-113(7)(b) in calculating the marital appreciation of her interest in the trust. She maintains that under the mandatory language of § 14-10-113(7)(b), her interest in the trust could not be classified as property until the trust became irrevocable in 1990 after her mother's death. We agree.

Marital property includes all property acquired by either spouse during the marriage except, as relevant here, property acquired by gift, bequest, or devise. Section 14-10-113(2)(a), C.R.S.2003.

A remainder interest in an irrevocable trust represents a present fixed right to future enjoyment that gives rise to a vested property interest in the trust even if that interest is subject to complete divestment or defeasance. Balanson II, supra; In re Marriage of Dale, supra.

A.

Although not explicitly argued in the briefs, at oral argument husband asserted that we may not address the issue of whether wife's interest in the trust, while it was still revocable between 1976 and 1990, was property because wife did not raise it in the prior proceedings. Relying on In re Marriage of Jones, 812 P.2d 1152 (Colo.1991), and In re Marriage of...