Pfannenstiehl v. Pfannenstiehl

• Decision Date: 04 August 2016
• Docket Number: SJC–12031.
• Citation: 55 N.E.3d 933,475 Mass. 105
• Parties: Curt F. PFANNENSTIEHL v. Diane L. PFANNENSTIEHL.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

475 Mass. 105

55 N.E.3d 933

Curt F. PFANNENSTIEHL

v.Diane L. PFANNENSTIEHL.

SJC–12031.

Supreme Judicial Court of Massachusetts, Norfolk.

Submitted April 5, 2016.

Decided Aug. 4, 2016.

Robert J. O'Regan, Boston, for the husband.

Jillian B. Hirsch, Boston, for the wife.

Martha R. Bagley, Marblehead, pro se, amicus curiae, submitted a brief.

William H. Schmidt, Boston, pro se, amicus curiae, submitted a brief.

Present: GANTS, C.J., SPINA, CORDY, BOTSFORD, DUFFLY, & HINES, JJ.¹

DUFFLY, J.

In this appeal from a judgment of divorce, we are asked to determine whether the present value of the husband's beneficial interest in a discretionary spendthrift trust (2004 trust) may be included in the parties' divisible marital estate. See G.L. c. 208, § 34, as amended by St. 2011, c. 124, §§ 1, 2. As part of the judgment of divorce in 2012, a judge in the Probate and Family Court awarded Diane L. Pfannenstiehl² sixty per cent of her husband Curt F. Pfannenstiehl's interest in the present value of the 2004 trust. At that time, the trust was valued at $2,265,474.31. Curt appealed, arguing that the judge abused her discretion by including the 2004 trust in the marital estate. In a divided opinion, the Appeals Court affirmed. See Pfannenstiehl v. Pfannenstiehl, 88 Mass.App.Ct. 121, 124, 37 N.E.3d 15 (2015). We granted Curt's application for further appellate review, limited to issues concerning the 2004 trust.

We conclude that Curt's interest in the 2004 trust is “so speculative as to constitute nothing more than [an] expectanc[y],” and thus that it is “not assignable to the marital estate.” See Adams v. Adams, 459 Mass. 361, 374, 945 N.E.2d 844 (2011), S.C., 466 Mass. 1015, 997 N.E.2d 107 (2013). Although Curt's expectancy of future acquisition of income from the 2004 trust is not part of the marital estate, on remand, the judge, pursuant to G.L. c. 208, § 34, may consider that expectancy as part of the “opportunity of each [spouse] for future acquisition of capital assets and income,” in the judge's determination of a revised equitable division of the marital property.³ See Williams v. Massa, 431 Mass. 619, 629, 728 N.E.2d 932 (2000) ; Drapek v. Drapek, 399 Mass. 240, 245, 503 N.E.2d 946 (1987).

1. Facts. “We recite the facts from the judge's findings and the uncontradicted evidence” in the record. Baccanti v. Morton, 434 Mass. 787, 788, 752 N.E.2d 718 (2001). Curt and Diane were married on February 5, 2000. They have two children, a son and a daughter. Curt filed his complaint for divorce on September 13, 2010. The parties were married for twelve years, but had been separated for nearly two years at the time of trial. Pursuant to G.L. c. 208, § 48, the length of the marriage thus was ten years and seven months. An amended divorce judgment was entered on August 27, 2012. At that time, Curt was forty-two years old and Diane was forty-eight years old; each was in generally good health. Their son was then eleven years old and their daughter was eight years old.⁴

During the marriage, Curt was employed primarily as an assistant bookstore manager for a subsidiary of his father's corporation, Educor, Inc.,⁵ earning approximately $170,000 per year Curt's total annual income was approximately $190,000 at the time of trial, including his earnings at other part-time jobs.⁶ Prior to and during the first few years of the marriage, Diane served in the United States Army Reserves, which obligated her to participate in two weeks of training twice per year. In 2004, Diane retired from the Army Reserves, two years short of the twenty years of service that would have entitled her to a pension. The judge found that she made the decision to retire after pressure from Curt and his family following the birth of their daughter, who has Down syndrome. From 2004 through the time of trial, Diane worked one day per week as an ultrasound technician. At the time, Diane was earning a gross annual income of $22,672. She also received $7,428 per year in rental income.⁷

During the marriage, the parties lived an upper middle class lifestyle. They owned a home valued at in excess of $700,000, as well as other real estate,⁸ took several vacations each year, and belonged to a country club. The income to support this lifestyle was derived largely from Curt's earnings, augmented by support from Curt's father, as well as by distributions to Curt from the 2004 trust. The judge found that Diane made significant contributions as a homemaker and caretaker of the children, while also contributing her earnings and rental income to the marital estate.

2. Discussion. a. The 2004 trust. The irrevocable trust at issue was established by Curt's father in 2004, a few years after Curt and Diane married.⁹ The trust benefits an open class of beneficiaries,¹⁰ composed of any one or more of the then living issue of Curt's father. “Issue” is defined in the trust as the “lawful blood descendants in the first, second, or any other degree of” Curt's father. The 2004 trust is funded through shares of two for-profit education corporations, several life insurance policies, and a cash account. The trustees are Curt's brother, who is also a trust beneficiary, and a family attorney who is not a beneficiary.

The 2004 trust provides that distributions to beneficiaries may be made only with the approval of both trustees, who

“shall pay to, or apply for the benefit of, a class composed of any one or more of the Donor's then living issue such amounts of income and principal as the Trustee, in its sole discretion, may deem advisable from time to time, whether in equal or unequal shares, to provide for the comfortable support, health, maintenance, welfare and education of each or all members of such class.”

The 2004 trust also contains a spendthrift provision, pursuant to which “[n]either the principal nor income of any trust created hereunder shall be subject to alienation, pledge, assignment or other anticipation by the person for whom the same is intended, nor to attachment, execution, garnishment or other seizure under any legal, equitable or other process.”¹¹

The judge found that, at the time of trial, there were eleven living beneficiaries—children and grandchildren of Curt's father—and no great-grandchildren. The judge determined the total present value of the 2004 trust to be $24,920,217.37 at that time. Based on her finding that Curt had a one-eleventh interest in the trust, she determined the value of Curt's interest in the trust to be $2,265,474.31.

At that point, only Curt and his two siblings had received any distributions from the 2004 trust; no distributions had been made to any of the grandchildren. Between 2004 and 2007, there were no distributions from the trust. From April, 2008, until August, 2010, Curt and his siblings received regular, tax-free distributions from the trust.¹² During that period, Curt received regular monthly distributions for a total of $800,000 in distributions. Since the complaint for divorce was filed in September, 2010, Curt has not received any distributions from the 2004 trust. The judge found that the distributions to Curt ceased when he filed the complaint for divorce because the trustees deemed it too risky to distribute funds to Curt at a time when he might be required to share the funds with Diane, a nonbeneficiary. The trustees continued to make distributions to Curt's two siblings.

The judge determined that distributions from the 2004 trust “augmented” Curt and Diane's income and lifestyle during the marriage. The judge concluded that Curt's interest in the 2004 trust should be included as part of the marital estate, and awarded sixty per cent of that estate to Diane.¹³ The judge based the award on her findings concerning Diane's “past, present and future contributions and her lessened ability to acquire capital assets and work full-time,” which she contrasted with Curt's “high salary, flexible work hours and beneficiary status in his father's estate planning.” To effectuate the division of the 2004 trust, the judge ordered Curt to pay Diane the sixty per cent of Curt's interest that she had been awarded in twenty-four monthly instalments of $48,699.77, for a total payment of $1,168,794.41, which included a three per cent interest rate.¹⁴ b. Equitable division of the marital estate. General Laws c. 208, § 34, vests broad authority in judges of the Probate and Family Court to make equitable division of the property included in the marital estate of divorcing parties, taking into account

“the length of the marriage, the conduct of the parties during the marriage, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities and needs of each of the parties and the opportunity of each for future acquisition of capital assets and income.... The court may also consider the contribution of each of the parties in the acquisition, preservation or appreciation in value of their respective estates.”

See Rice v. Rice, 372 Mass. 398, 401, 361 N.E.2d 1305 (1977) ; Bianco v. Bianco, 371 Mass. 420, 422, 358 N.E.2d 243 (1976).

Although a judge “has considerable discretion in determining how to divide [marital] assets equitably,” Baccanti v. Morton, 434 Mass. 787, 792, 752 N.E.2d 718 (2001), the question we address here, whether an interest in a trust is sufficiently similar to a property interest that may be included in a marital estate and thus subject to equitable division under G.L. c. 208, § 34, is a question of law. See Lauricella v. Lauricella, 409 Mass. 211, 213, 565 N.E.2d 436 (1991).

General Laws c. 208, § 34, further provides that

“the court may assign to either husband or wife all or any part of the estate of the other, including but not limited to, all vested and nonvested benefits, rights and funds accrued during the marriage and which shall include, but not be limited to, retirement benefits, ... pension, profit-sharing, annuity, deferred compensation and insurance.”

A party's estate for purposes of...