No. 2020-0051

Supreme Court At-a-Glance Contributor Laura D. Devine, Civil Litigation Attorney, Boyle Shaughnessy Law, Manchester, NH

May 5, 2021

Reversed in part, vacated in part, and remanded.

 

  • Whether an irrevocable life insurance trust established by someone’s parents is marital property for purpose of a divorce

 

The respondent appealed a final divorce decree which awarded the petitioner part of her interest in an irrevocable life insurance trust established by her parents. She argued that the trial court erred in classifying her interest as marital property subject to equitable division.

The Court noted the relevant facts as follows.

The Trust at issue was formed in 2000 by the respondent’s parents and named respondent and her two siblings as beneficiaries. The primary asset in the Trust is a flexible premium variable life insurance policy issued to the respondent’s parents in 2001. The parents are the insureds and is payable upon the death of the second parent. The Trust is self-sustaining, the interest the policy generates pays for the annual insurance premium. The Trust permits distributions from time to time. The Trustee may exercise this discretion by making distributions of income or principal to the beneficiaries, for his or her support in reasonable comfort, education, and maintenance in health. The Trust contains a spendthrift provision. The beneficiary’s distribution in the Trust passes to his or her living issue, apportioned per stirpes, unless the beneficiary selects someone else.

The parties married in 2002. Between 2001 and 2008, the respondent received five distributions, totaling about $65,000. In 2017, citing irreconcilable differences, the parties filed for divorce.

In the trial court division of marital property, it held a hearing on whether the petitioner was entitled to any portion of the respondent’s interest in the Trust. The respondent conceded that the distributions she received during her marriage constituted marital property, but she argued the petitioner was not entitled to any portion of post-divorce distributions that she may receive. The trial court disagreed and ordered the petitioner one-sixth of the cash value of the life insurance policy, reflecting one-half of the respondent’s remainder interest in the Trust as well as one-half of any future distributions the respondent withdraws from inter vivos transfers for five years following the effective date of the divorce decree. The trial court denied the respondent’s motion for reconsideration.

In its ruling, the Court noted that if the trial court apportions marital property, in divorce cases, it must do equitably and includes “all tangible and intangible property and assets, real or personal, belonging to either or both parties, whether title to the property is held in the name of either or both parties.” Further, the Court noted that this includes any property acquired up to the date of a final decree of divorce.

The Court agreed with the respondent’s first argument on appeal. That the trial court’s classification of her interest in the Trust as marital property precludes any beneficial interest in a trust that is subject to a spendthrift provision from being classified as marital property.

The Court reversed the trial court ruling that the Trust was marital property and vacated the remainder of the property division determination and remanded the matter to the trial court for further proceedings.

 

Wm. Michael Earley, self-represented. Christine Rockefeller, Burns, Bryant, Cox, Rockefeller & Durkin, Dover, for the respondent.