Opinion ID: 2548945
Heading Depth: 1
Heading Rank: 2

Heading: Trust Distributions as Marital Property

Text: Goodlander first argues that the trial court erred in finding that any post-divorce distributions from the EMT Trust are not marital property subject to division. Specifically, he argues that Tamposi has a vested right in the SAT Trust and, therefore, he is entitled to a portion of the future distributions she receives through the EMT Trust. Therefore, he argues, the trial court erred in concluding that Tamposi's right to future distributions from the EMT Trust rises only to the level of a mere expectancy. We disagree. [T]he trial court first determines, as a matter of law, what assets are marital property under RSA 458:16-a, I, and thus subject to equitable distribution, and then exercises its discretion to make an equitable distribution of those assets. In the Matter of Chamberlin & Chamberlin, 155 N.H. 13, 16, 918 A.2d 1 (2007). Trial court determinations under RSA 458:16-a, I, are reviewed de novo, while equitable divisions of property pursuant to RSA 458:16-a, II are reviewed for an unsustainable exercise of discretion. Id. Because Goodlander challenges the ruling that future distributions of the EMT Trust are not marital property, our review is de novo. [Marital] [p]roperty shall include 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. RSA 458:16-a, I (2004). Here, the parties do not dispute that the corpus of the SAT Trust is not marital property subject to division under the statute, as Tamposi has no right to invade the trust corpus. See Chamberlin, 155 N.H. at 17, 918 A.2d 1 (If neither the settlor nor the settlor's creditors may invade the corpus of an irrevocable trust, it would be incongruous to count such a trust as a marital asset, interchangeable with other assets upon which the parties freely may draw.); see also RSA 564-B:5-505 (a)(2). Nevertheless, Goodlander argues that because an independent trustee is authorized to make distributions from the EMT Trust to Tamposi for her education, maintenance in health and reasonable comfort, she has a vested right to future distributions from the EMT Trust. In support of his argument, Goodlander cites Chamberlin, in which we concluded that the marital interest subject to division is not the [trust corpus] itself but the parties' interest in the trust. Chamberlin, 155 N.H. at 18, 918 A.2d 1 (quotation and brackets omitted). While we agree that the parties' interest in the trust is paramount in determining whether the trust assets are marital property, we do not agree that Tamposi's interest in any future distributions of the EMT Trust constitutes more than a mere expectancy. A perfect vested right can be no other than such as is not doubtful, or depending on any contingency, but absolute, fixed and certain. In the Matter of Goldman & Elliott, 151 N.H. 770, 774, 868 A.2d 278 (2005) (quotation omitted). [I]f a distribution to or for the benefit of a beneficiary is subject to the exercise of the trustee's discretion, whether or not the terms of a trust include a standard to guide the trustee in making distribution decisions, then the beneficiary's interest is neither a property interest nor an enforceable right, but a mere expectancy. RSA 564-B:8-814(b). Here, Tamposi's hope for a discretionary distribution from the EMT Trust is not a fixed, certain and absolute right. The terms of the SAT Trust state that all assets of the SAT Trust are to be controlled and managed by investment directors Samuel A. Tamposi, Jr. and Stephen A. Tamposi, Tamposi's brothers. The directors are given the powers of management, control, handling, financing, refinancing and structuring of any and all real estate interests, as well as full power and authority to direct the retention or sale of all other assets ... included in the trust property. Each sub-trust, including the EMT Trust, is funded by distributions made from the SAT Trust by the investment directors. Testimony at the parties' divorce hearing indicated that certain funds generated from the SAT Trust assets are generally not reinvested; rather, the practice of the investment directors has been to distribute such funds to the sub-trusts once the balance of the common account of the SAT Trust reaches approximately $50,000. Once funds have been distributed to the sub-trusts by the investment directors, the trustee of each sub-trust has the discretion to distribute those funds to the trust beneficiaries for their education and maintenance in health and reasonable comfort, bearing in mind that he or she has a fiduciary duty to all beneficiaries of the trust and must pay out taxes and other expenses necessary to meet the trust's financial obligations. A beneficiary is thus twice removed from access to the trust assetsfirst, by the investment directors' discretion in making distributions to the sub-trusts, and again by the trustee's discretion to distribute any sub-trust funds to the beneficiaries. Samuel Tamposi, Jr. testified that beneficiaries have no authority to force distributions by a trustee, and that any distributions are solely within the trustee's total authority and jurisdiction. Similarly, Attorney Joseph McDonald, an expert on trusts and estates law, testified that the significance of the third party trustee to the EMT Trust was that Tamposi as a practical matter, [has] no control to compel distributions. We further note that, in reviewing the language of the SAT Trust and its sub-trusts in connection with a separate action initiated by Tamposi in probate court, the probate court aptly noted: That the trust instrument grants the trustee authority to distribute principal and income is not a compelling argument for enabling the trustee to issue mandates to or superintend the investment directors. The investment directors make distributions to the trustees that include income from investment assets as well as proceeds from their sale. When cash is distributed to the sub-trusts, it may be retained or distributed to the beneficiaries, in the discretion of the trustee. (Emphasis added.) Nevertheless, Goodlander makes much of the following testimony of EMT trustee Julie Shelton: A. ... The trustee may, from time to time, pay to or for the benefit of [Tamposi], and [Tamposi's] issue, from time to time, living, or any one or more of them, such amounts from the net income and principal of the trust, and in such proportion among them, as the trustee considers necessary for their education and maintenance and health and reasonable comfort, taking into consideration the income and cash resources known to the trustee to be available for such purposes from the other source. . . . . Q. So is it your testimony you have unfettered discretion to do whatever you want? A. No, of course not. This exchange does not support the proposition that Tamposi has control over trust distributions. Shelton owes a fiduciary duty to all beneficiaries of the trust. See RSA 564-B:8-802 (A trustee shall administer, invest and manage the trust and distribute the trust property solely in the interests of the beneficiaries.); RSA 564-B:8-803 (If a trust has 2 or more beneficiaries, the trustee shall act impartially in administering, investing, managing, and distributing the trust property, giving due regard to the beneficiaries' respective interests.); RSA 564-B:8-804 (A trustee shall administer, invest, and manage the trust and distribute the trust property as a prudent person would....); RSA 564-B:8-810(a) (A trustee shall keep adequate records of the administration of the trust.); RSA 564-B:8-811 (A trustee shall take reasonable steps to enforce claims of the trust and to defend claims against the trust.). Thus, while the trustee does not have unfettered discretion to do whatever she wants with funds from the trust, she nonetheless possesses discretion to distribute to the beneficiaries, or retain in the sub-trusts, funds disbursed by the investment directors. Because the trustee of the EMT Trust has the sole discretion to distribute funds to the beneficiaries, including Tamposi, any interest Tamposi has in future distributions fits squarely within the definition provided by the UTC for a mere expectancy. RSA 564-B:8-814(b). That is, any distribution to or for the benefit of Tamposi is subject to the exercise of the trustee's discretion, whether or not the terms of a trust include a standard to guide the trustee in making distribution decisions. Id. Accordingly, Tamposi's interest in future distributions of the EMT Trust is neither a property interest nor an enforceable right, but a mere expectancy. Id. Goodlander argues that under Tuttle v. New Hampshire Medical Malpractice Joint Underwriting Assoc., 159 N.H. 627, 992 A.2d 624 (2010), Tamposi's beneficial interest in the SAT Trust is equivalent to a vested right. We find Tuttle distinguishable. In Tuttle, policyholders of the Joint Underwriting Association (JUA) alleged that pursuant to their contracts with the JUA and certain administrative rules, they had a vested right in any excess surplus premiums collected by the JUA. Tuttle, 159 N.H. at 634, 992 A.2d 624. In concluding that the petitioners did have such a vested right, we emphasized that the JUA regulations, rather than conferring discretion, mandate one or both of two options for application of any excess surplus, both of which inure to the policyholders' direct financial benefit. Id. at 646, 992 A.2d 624 (emphasis added). Thus, it was only under those limited circumstances that we concluded a beneficial interest may constitute a vested property right, subject to protection. Id. at 644-45, 992 A.2d 624. Here, it is precisely because there is no mandated financial benefit to Tamposi from the EMT Trust that her interest is not vested. Because the trustee of the EMT Trust has the discretion to retain funds within the sub-trust or to distribute funds for the benefit of the other beneficiaries, none of the beneficiaries possess a vested interest in future trust distributions. Tamposi is not empowered to direct disbursement of EMT Trust funds for her benefit. Goodlander asserts in passing that Tamposi has the right to appoint herself as trustee and to directly access the EMT Trust assets. The record, however, does not support this assertion. The trust instrument does not indicate Tamposi may appoint herself as trustee. Further, while it is undisputed that she won the right, via litigation against the investment directors, to appoint a trustee of her choice for the EMT Trust, the undisputed testimony of expert witness Attorney McDonald was as follows: And then we had this dust up in the probate court followed by a settlement in 2006 which effectively revoked certain provisions of the trust, and that gave [Tamposi] the ability to appoint her own trustee and that's where Julie [Shelton] came into the picture, and also gave her a very common power in trust documents to remove and replace that trustee as well. But that trustee is restricted. [Tamposi's] power is restricted to a successor trustee that is not [Tamposi] herself, [or] any of [Tamposi's descendants]. It's got to be a so-called disinterested trustee, no beneficial interest in the trust estate, and it can't be anyone related or subordinate to [Tamposi] or any other beneficiary. Thus, Tamposi may not simply appoint herself as trustee in order to access the EMT Trust funds.