Wife’s interest in trust is marital asset, COA affirms

IL file photo

A trust providing regular payments to a woman should be considered a marital asset and included in the assets under consideration for division in the woman’s divorce case, the Court of Appeals of Indiana ruled Wednesday.

That decision came in a case involving Juliet Roberts and John A. Roberts Jr., who were married in 1962.

Harriet Cain, Juliet’s mother, created a trust in June 1967 and amended and restated the trust instrument on Dec. 21, 1981. One provision of the trust, referred to as Section VI. B., provided that, “The Trustee shall distribute to said daughter, or to such recipient as she may designate, so much or all of the trust principal as she may, from time to time, direct by an instrument or instruments in writing delivered to the Trustee; provided, however, that such right to withdrawal shall not apply to undivided interests in assets, such as the Settlor’s farm, the distribution of which, in the opinion of the Trustee and the Adviser, would substantially diminish the fair market value of the remaining undivided interests held by the Trustee.”

Harriet died in 1985, and John became the trustee in February 2013.

Then in March 2019, Harriet’s daughter, Suzanne, died, leaving three children, including son Michael Baldwin.

In October 2019,  Baldwin filed a petition for relief alleging that John had breached his duties as trustee and failed to follow the terms of the trust. A settlement agreement was entered in May 2020.

Then in January 2022, Juliet filed for divorce in Marion Superior Court. Four days later, the court issued an order removing John from the trust and appointing Arrow Fiduciary Services as trustee.

In April 2022, Juliet filed a motion for summary judgment requesting a finding that her interest in the trust was not a marital asset. She argued the trust met the requirements of a spendthrift trust.

But the trial court denied Juliet’s summary judgment motion, writing, “Here, [Husband] has raised a genuine issue of material fact regarding the meaning and effect of the Trust language in Section VI. B. of the instrument. While the Court may determine, after final hearing and the consideration of facts, testimony, and evidence, that the [Trust] should not be considered a marital asset, the Court does not determine the same as a matter of law.”

Juliet then filed an interlocutory appeal, and the Court of Appeals affirmed the denial of her motion for summary judgment.

Judge Elaine Brown wrote the opinion for the appellate court.

According to Brown, Juliet began receiving payments from the net income of the trust during her marriage to John and is receiving payments from the trust at least quarterly.

In light of the trust’s assets, sources of income and ongoing mandatory payments, the COA could not say that Juliet’s interest is too remote or speculative to be capable of division, or that she does not have a presently fixed right to future enjoyment, Brown wrote.

“Given the broad language in Indiana’s statutes governing the division of marital property and our caselaw that all marital property goes into the marital pot for division, we cannot say the trial court erred in denying Wife’s motion for summary judgment,” she wrote.

As to the issue of whether the trust met the requirements of a spendthrift trust, the trial court was not required to grant Juliet’s motion for summary judgment on that basis, Brown continued, finding the designated evidence did not establish as a matter of law that the trust does not hold any assets that may be distributed pursuant to those terms.

The Court of Appeals expressed no opinion as to whether the trial court should ultimately determine that Juliet’s interest in the trust should be awarded to her or as to the appropriate method of valuing or awarding a portion of her interest in future distributions from the trust.

Judges Terry Crone and Paul Felix concurred in Juliet C. Roberts v. John A. Roberts, Jr., 23A-DN-588.