This article was published in Steve Leimberg’s Estate Planning Newsletter and provides a discussion on the Ferri vs. Powell case.

  • The Connecticut Supreme Court found that trust assets were moved out of reach of a divorcing wife through a ‘decanting process,’ but would be considered for alimony purposes.
  • While about half the states provide statutory authority to decant, most states require that notice be given to beneficiaries.
  • Including decanting provisions in trust instruments may maximize flexibility without having to rely on state default law.

In this case, the husband was the beneficiary of a trust (the 1983 Trust) created by his father under which he had the right to receive the trust assets at certain ages. The trust was valued between $69 – $98 million. The trustees, who were concerned the divorcing wife would reach the trust assets, transferred the assets to a new trust (the 2011 Trust) without the knowledge or consent of the husband. At the time of the creation of the 2011 trust, the husband had a right to request 75% of the 1983 trust, and during the course of the legal proceedings, his right matured to 100%. The 2011 trust extinguished the husband’s power to request trust assets at stated ages, making distributions solely discretionary with the trustees. The process of transferring the original trust assets to a new trust with different terms is known as decanting.

 

REPRODUCED COURTESY OF LISI (LEIMBERG INFORMATION SERVICES, INC) at http://www.LeimbergServices.Com

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