Chilcott v. Chilcott

Annotate this Case
 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, Vermont Supreme
 Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
 that corrections may be made before this opinion goes to press.


                                 No. 90-346


 Cynthia R. Chilkott                          Supreme Court

      v.                                      On Appeal from
                                              Chittenden Superior Court
 Robert B. Chilkott
                                              June Term, 1991


 Silvio T. Valente, J.

 Catherine E. Clark, Burlington, for plaintiff-appellee

 Richard W. Affolter of Sheehey Brue Gray & Furlong, Burlington for
    defendant-appellant


 PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


      MORSE, J.   Defendant husband appeals the property award in this
 divorce.  His principal claim is that the trial court's valuation of a
 trust was erroneous because the trust was not subject to the jurisdiction of
 the court within the meaning of 15 V.S.A. { 751 (equitable distribution of
 marital property).  He also argues that, even if the trust was properly
 taken into account in distributing the marital assets, the trial court erred
 in accepting an expert's opinion as to its value.  Finally, husband contends
 that the uneven distribution of the property was unfair and unreasonable.
 Because we conclude that the trust was marital property and the trial court
 did not abuse its discretion in evaluating it and making its overall
 property distribution, we affirm.
      Husband was one of the beneficiaries of an inter vivos trust which his
 father created.  The trust became irrevocable when his father died.  Secu-
 rities funded the trust, and at the time of the final hearing were valued at
 $220,000.  The death of father entitled husband's mother to all the trust
 income for her life.  The trustee had power to invade the principal for the
 mother's health, maintenance and welfare, but had not done so.  Mother,
 eighty-seven-years-old, was alive at the time of trial.
      When mother dies, husband, if he is alive, will receive the income
 from the trust and an unrestricted right to invade the principal.  At
 husband's death, plaintiff wife would receive the income for life.  Upon the
 death of all income beneficiaries, the remainder, if any, will be paid to
 the donor's grandchildren, or if they are deceased, to their issue by right
 of representation, free of the trust.
      At trial, wife called an actuarial expert, who testified that husband's
 present interest in the trust was valued at $128,034.  Husband did not offer
 any evidence contradicting this testimony other than cross-examination, and
 the court adopted this figure in its findings of fact.
      Husband received a property distribution worth approximately $197,000,
 including his interest in the trust, his business, pension, stocks, an
 automobile, and a snowmobile.  Wife was awarded marital property valued at
 approximately $220,000, including the marital residence, her one-half
 interest in real estate located in New Hampshire, the homestead furnishings,
 and personal property associated with her ceramics business.
      Husband and wife were married for approximately 33 years and raised
 four children.  At the time of the divorce, husband was living, rent free,
 with his mother, from whom he also received money for expenses.  A college
 graduate, husband was the primary wage earner during the marriage.  The
 court found that husband's net income after the divorce would be $1,700 per
 month.  Wife, also a college graduate, was currently working in a nursing
 home.  She had worked as a medical secretary in 1958, and then in a school
 lunch program.  Aside from the ceramics business, which had no net earnings
 during its five years of operation, wife had no other employment skills.
 Wife's earned net income was $978 per month, and she was awarded $357 a
 month in maintenance.
     Both parties drank excessively until 1981, when wife addressed her
 drinking habit.  She has abstained from alcohol since 1983.  Denying that he
 had a drinking problem, husband continued to drink, despite the advice of
 physicians and his then-living father.
                                     I.
      Husband initially claims that the trial court abused its discretion by
 including in the property distribution his interest in the trust, because it
 was an asset not "owned" by him within the meaning of 15 V.S.A. { 751.  We
 conclude that husband's interest in the trust was marital property subject
 to distribution under { 751(a).
      Under 15 V.S.A. { 751(a), "[a]ll property owned by either or both of
 the parties, however and whenever acquired" is subject to the court's juris-
 diction.  See also Lynch v. Lynch, 147 Vt. 574, 576, 522 A.2d 234, 235
 (1987) (any form of ownership by either spouse makes property subject to the
 jurisdiction of the court).  Although the trust represents to the parties a
 future, contingent interest, the trust is a form of property subject to
 ownership. (FN1) See Guild v. Prentis, 83 Vt. 212, 214, 74 A. 1115, 1116 (1910)
 (ownership may be of fee or a lesser estate); Restatement of Property { 10
 (1936) (owner is a person with an interest in property); G. Bogert, Trusts {
 37 at 133 (6th ed. 1987).  Our conclusion derives from the principle,
 adopted by states with property division statutes resembling ours, that
 property ownership ought not "to be determined by the wooden application of
 technical rules of the law of property."  Davidson v. Davidson, 19 Mass.
 App. 364, 371, 474 N.E.2d 1137, 1144 (1985).
      In Vermont, { 751(a) has been applied to property interests with
 characteristics similar to those at issue here.  In Osborn v. Osborn, 147
 Vt. 432, 434, 519 A.2d 1161, 1163 (1986), we held that a share of an undis-
 tributed estate was marital property subject to { 751(a) even though it was
 not known whether it had any value and even though it could not be distri-
 buted to the other spouse.  The inability to distribute the estate was not
 an impediment because creative alternatives were available to effect an
 equitable distribution of the property.  Id.; see also Hendrick v. Hendrick,
 142 Vt. 357, 361, 454 A.2d 1251, 1253 (1982)(describing alternatives when a
 specific property cannot be distributed).  In McDermott v. McDermott, 150
 Vt. 258, 259-60, 552 A.2d 786, 787-88 (1988), { 751(a) was applied to a
 pension.  Although the pension in McDermott had vested, but not matured,
 vesting was not critical to the outcome.  Most courts follow the rule that
 vesting is not necessary for a pension to be considered marital property.
 See L. Golden, Equitable Distribution of Property { 6.13, at 171 n.130
 (1983).
                                   II.
      The real issue here is not whether husband's trust interest is marital
 property but instead whether the future interest is so remote that it has no
 ascertainable present value or whether its value, in the words of the
 McDermott court, "can be assessed without excessive speculation." McDermott,
 150 Vt. at 260, 552 A.2d  at 788; see Note, The Trust in Marital Law:  Divis-
 ibility of a Beneficiary Spouse's Interests on Divorce, 64 Tex. L. Rev.
 1301, 1354 (1986).  This was not a situation where the trust was ambulatory,
 making husband's interest a "bare hope of succession to the property of
 another."  Rubin v. Rubin, 204 Conn. 224, 229, 527 A.2d 1184, 1187 (1987).
 Husband's father was dead at the time of the property division, making the
 trust irrevocable.  Therefore, husband's remainder interest in the trust was
 fixed and no longer inchoate.  See Davidson, 19 Mass. App. at 372, 474 N.E.2d  at 1144 (death of donor "fixed" remainderman's interest, even though
 it was subject to a condition of survivorship).  The trust would become
 worthless only if the trustee exhausted the principal for the mother's care.
 Husband's mother, the life tenant, was eighty-seven-years-old at the time of
 trial and had never drawn on the corpus of the trust.  Wife's expert witness
 made assumptions in valuing husband's interest in a reasonable way in light
 of these facts and general economic and life expectancy factors.
      The difficulties in valuing husband's interest in the trust are similar
 to those encountered in valuing a pension  because the value of the pension
 is contingent on the worker reaching retirement.  Once we accept the pension
 contingency, the contingencies in the instant case do not defeat the applic-
 ability of { 751(a).  Wife's actuarial expert testified that the same
 principles apply to valuing trusts as to valuing pensions.  We have held
 that the use of such an expert is a proper method to determine the value of
 a pension in evaluating a spouse's opportunity for the future acquisition of
 capital assets and income.  Victor v. Victor, 142 Vt. 126, 129, 453 A.2d 1115, 1117 (1982).  The expert took into account the age, situation and past
 conduct of husband's mother with respect to the trust.  She also analyzed
 the situations of the parties using annuity mortality tables.  Husband's
 cross-examination may have served to weaken the weight of the expert's
 opinion, but it did not completely eliminate its probative value.
      The court's acceptance of the expert's estimate of husband's financial
 interest in the trust was not clearly erroneous.  V.R.C.P. 52(a)(2).   The
 actuary, qualified as an expert in the field,  served to "assist the trier
 of fact to understand the evidence."  V.R.E. 702.  Certainly, the court
 could have attributed some value to husband's expectancy interest, and the
 actuary's opinion gave the court guidance in valuing it. In short, the
 expert advice improved the reliability of the fact-finding on the value of
 husband's interest in the trust.
      Finally, we note that the court perceptively required an "immediate
 offset method" of distribution rather than a "deferred distribution or
 reserved jurisdiction method" (distribute share of trust when no longer
 contingent), because of the finality fostered in dealing with the asset
 today, thereby avoiding "further entanglement of the parties and problems
 with continuing supervision by the court."  McDermott, 150 Vt. at 260-61,
 552 A.2d  at 788.
                                    III.
      Husband's last contention is that even if consideration of the present
 value of the trust to husband was proper, the distribution was so unfair and
 uneven as to amount to an abuse of discretion.
      Trial courts have broad discretion in distributing marital property.
 See, e.g., Scott v. Scott, 155 Vt. 465, 471-72, 586 A.2d 1140, 1144 (1990)
 (trial court's distribution of marital property will not be disturbed on
 appeal unless discretion was abused, withheld or exercised on untenable
 grounds).  Here, the court's consideration of husband's opportunity to
 receive future income from the trust and the wife's relatively lower earning
 capacity supported any inequality in the distribution of the marital assets.
 Moreover, the court's assessment of the respective merits of the parties
 also supports an uneven distribution.  15 V.S.A. { 751(b)(12); see Daitchman
 v. Daitchman, 145 Vt. 145, 151-52, 483 A.2d 270, 273-74 (1985) (property
 distribution statute calls court's attention to parties' conduct during
 coverture).  The trial court found that husband's drinking problem caused in
 significant part the breakdown of the marriage.
      Affirmed.

                                         FOR THE COURT:



                                         ________________________________
                                         Associate Justice




FN1.       A review of opinions from other states on this question reveals
 there in no unanimity as to whether trial courts should consider or divide
 future interests in trusts in making a property division.  Lauricella v.
 Lauricella, 409 Mass. 211, 214-15, 565 N.E.2d 436, 438 (1991) ("[n]o clear
 consensus" among states on the propriety of considering or dividing trusts
 in property distributions).  See Annot., Divorce Property Distribution:
 Treatment and Method of Valuation of Future Interest in Real Estate or Trust
 Property not Realized During Marriage, 62 A.L.R. 4th 107 (1988);  Note, The
 Trust in Marital Law:  Divisibility of a Beneficiary Spouse's Interests on
 Divorce, 64 Tex. L. Rev. 1301 (1986).   Because characteristics of trusts
 differ so greatly, case law turns "on the attributes of the respective dis-
 puted interests," Lauricella, 409 Mass. at 215-16, 565 N.E.2d  at 439, and
 construction of the enabling statute.

-------------------------------------------------------------------------------

                                   Dissenting

 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, Vermont Supreme
 Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
 that corrections may be made before this opinion goes to press.


                                 No. 90-346


 Cynthia R. Chilkott                          Supreme Court

      v.                                      On Appeal from
                                              Chittenden Superior Court
 Robert B. Chilkott
                                              June Term, 1991


 Silvio T. Valente, J.

 Catherine E. Clark, Burlington, for plaintiff-appellee

 Richard W. Affolter of Sheehey Brue Gray & Furlong, Burlington for
    defendant-appellant


 PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


      ALLEN, C.J., dissenting.   I dissent because the property distribution
 is based upon assumptions and speculations which may or may not come to
 pass.  While the trial court and this Court believe that the wife has been
 awarded marital property valued at $220,000 and the husband has been awarded
 $197,000, the husband did not receive and may never receive $128,000 of that
 award.  In order for the husband to receive this sum it must be assumed that
 the trustee will not invade for the benefit of the mother, that the son will
 survive his mother and that the son will then exercise his right to invade.
      We have previously recognized two methods of distribution for uncertain
 interests in property during divorce proceedings.  When such property can be
 actuarially valued, it may be distributed immediately through the offset
 method.  Alternatively, the court can retain jurisdiction and distribute the
 property as it becomes available to one of the parties.  See McDermott v.
 McDermott, 150 Vt. 258, 261, 552 A.2d 786, 788-89 (1988) (discussing the two
 methods of distribution in the context of a pension plan).  The latter
 approach allows the court to base the property distribution on actual
 figures rather than assumptions.  Id. at 261, 552 A.2d  at 789.  A third
 approach is to make an award to a spouse of a non-interest-bearing judgment
 for a percentage of the trust when it becomes available to the other
 spouse.  See Bentson v. Bentson, 61 Or. App. 282, 283, 656 P.2d 395, 397
 (1983).  This avoids the need for retained jurisdiction and preserves the
 advantages associated with distributions based on actual figures rather than
 speculation.
      Here, the actuary assumed that the principal would stay intact until
 the death of the husband's mother and did not take into account the
 possibility that it might be substantially depleted by invasion to care for
 the mother's final years.  The trustee had the express power to invade the
 corpus as was "reasonable and necessary" for the mother's "comfortable,
 support, maintenance, benefit and welfare."  I question whether the
 husband's interest is even susceptible of actuarial valuation given the
 broad power of invasion.  Davidson v. Davidson, 19 Mass. App. 364, 371, 474 N.E.2d 1137, 1143-44 (1985) (value of remainder interest is uncertain and
 actuarial calculations are of no avail where trustees could invade "in their
 uncontrolled discretion").
      While the assumptions upon which the court bases its property division
 could conceivably occur, it is equally plausible that the husband will
 receive little or nothing from the trust or that the wife will receive all
 of the income therefrom during her life.  A fairer approach would be to
 divide the benefits from the trust on an "if, as, and when they are
 received" basis, and to make an equitable assignment of the assets that are
 in possession and readily susceptible of division.




                                         Chief Justice