Opinion ID: 884607
Heading Depth: 1
Heading Rank: 5

Heading: Did the District Court err in excluding Andy's trust interest from the marital estate?

Text: ¶ 28 Initially, the District Court ordered Bernadene to answer discovery aimed at determining the value of the John G. Beadle Revocable Trust. The court held that the trust is a vested remainder, subject to divesture and, thus, part of the marital estate. However, after Bernadene presented the District Court with proof that she had executed a codicil to her will exercising her power of appointment to exclude Andy from receiving any trust proceeds, the District Court overruled its prior order compelling discovery of the trust assets and held that because Bernadene had exercised her power of appointment, Andy no longer had any vested remainder interest in the John G. Beadle Revocable Trust. In her reply brief, which was filed after Bernadene's death, Linda argues that the District Court erred in not including Andy's trust interest in the marital estate because, regardless of the status of Bernadene's will prior to her death, Andy's interest was vested. ¶ 29 Although the District Court was correct in holding that Andy's interest in the trust should not be included in the marital estate, we disagree with the District Court's reasoning. While it is possible to reconcile the holdings of past cases discussing when an interest acquired through a testamentary trust or devise should be considered for the equitable division of the marital estate, no clear general rule has been enunciated. Thus, we attempt to clarify what has heretofore been an unclear area of the law. ¶ 30 Under § 40-4-202, MCA, in dividing the property of the marriage, the court shall consider the opportunity of each for future acquisition of capital assets and income. We discussed whether a spouse's interest in a testamentary trust is properly considered in dividing the marital estate in In re Marriage of Meeks (1996), 276 Mont. 237, 915 P.2d 831. In Marriage of Meeks, 276 Mont. at 242, 915 P.2d at 834, Linda Meeks moved to dissolve her marriage from Alan Meeks. In his will, Alan's father had established a testamentary trust for the benefit of his wife, Alan's mother, and named Alan and his brother as co-trustees. Marriage of Meeks, 276 Mont. at 243, 915 P.2d at 835. According to the terms of the will, the trust was to terminate upon his wife's death and be distributed equally between Alan, his brother, and his sister. Marriage of Meeks, 276 Mont. at 243, 915 P.2d at 835. The will also contained a spendthrift provision which provided that no title in the trust or income therefrom would vest prior to actual distribution. Marriage of Meeks, 276 Mont. at 243, 915 P.2d at 835. Prior to the dissolution proceedings, his father passed away. ¶ 31 Alan moved the district court to exclude his interest in the testamentary trust, and the court granted the motion. Marriage of Meeks, 276 Mont. at 243, 915 P.2d at 835. On appeal, Linda argued that Alan's interest in the trust was a vested remainder and should therefore have been considered part of the marital estate. Marriage of Meeks, 276 Mont. at 244, 915 P.2d at 835. This Court noted that a vested remainder is `one which is limited to an ascertained person in being, whose right to the estate is fixed and certain, and does not depend on the happening of any future event, but whose enjoyment and possession is postponed.... [A] vested remainder is not rendered contingent by the fact that it may never vest in possession.' Marriage of Meeks, 276 Mont. at 244, 915 P.2d at 835-36(quoting 23 Thompson on Real Property, 325-26). ¶ 32 We held that because the interest was not dependent upon the occurrence of some future event, it was a vested remainder. Marriage of Meeks, 276 Mont. at 244, 915 P.2d at 836. In other words, Alan was sure to inherit so long as he did not predecease his mother or she did not deplete the trust corpus. Marriage of Meeks, 276 Mont. at 244, 915 P.2d at 836. Therefore, we labeled Alan's interest in the testamentary trust a vested remainder subject to divestment. Marriage of Meeks, 276 Mont. at 244, 915 P.2d at 836. ¶ 33 However, having labeled Alan's interest a vested remainder, we noted that [s]uch classifications, however, are not necessarily controlling regarding how a remainder interest should be treated. When such interests are created by a will, the testator's intent also must be considered. Marriage of Meeks, 276 Mont. at 244, 915 P.2d at 836. We stated that [t]he testator's intent, if clearly articulated, can preserve as contingent a remainder which otherwise would be deemed to have vested. Marriage of Meeks, 276 Mont. at 245, 915 P.2d at 836. We then held that the spendthrift provision in Alan's father's will clearly expressed his intent that Alan's interest in the trust would remain contingent until distribution. Marriage of Meeks, 276 Mont. at 245-46, 915 P.2d at 836. We concluded that, therefore, the district court did not err in holding that this interest was not part of the marital estate. Marriage of Meeks, 276 Mont. at 246, 915 P.2d at 836. ¶ 34 In contrast, in In re Marriage of Hill (1982), 197 Mont. 451, 643 P.2d 582, this Court included Robert Hill's remainder interest in land in the marital estate. Robert's father, in his will, devised to Robert a remainder interest in land with a life estate to his wife, Robert's mother. Marriage of Hill, 197 Mont. at 457, 643 P.2d at 586. The district court held that Robert's interest was a vested interest subject to divestment and therefore not to be included in the marital estate. Marriage of Hill, 197 Mont. at 458, 643 P.2d at 586. This Court reversed, holding that the mere fact that Robert could predecease his mother, the life tenant, did not convert his vested interest into one subject to divestment. Marriage of Hill, 197 Mont. at 458, 643 P.2d at 586. We held [a]t the time of the marriage dissolution ... [Robert] had a remainder interest with a present value, a property interest which will ripen into a full one-fourth interest in all of the land upon the death of his mother. Marriage of Hill, 197 Mont. at 458, 643 P.2d at 586. We concluded that because Robert's interest could be sold or otherwise alienated, transferred or mortgaged, the property had a present value and should be included. Marriage of Hill, 197 Mont. at 459, 643 P.2d at 587. ¶ 35 In Buxbaum v. Buxbaum (1984), 214 Mont. 1, 692 P.2d 411, this Court considered a vested trust interest and concluded it was properly included in the marital estate. Adam and Bonita Buxbaum's marriage was dissolved, and their marital assets distributed. Buxbaum, 214 Mont. at 3, 692 P.2d at 412. Prior to his death, Adam's father had transferred shares of stock to a testamentary trust for his wife's benefit. Buxbaum, 214 Mont. at 4, 692 P.2d at 412. At her death, a majority of the trust principal was to go to Adam. Buxbaum, 214 Mont. at 4, 692 P.2d at 412. Both Adam and Bonita characterized Adam's interest in the trust as a vested future interest subject to defeasance, but Bonita argued that it should be included in the marital estate. Buxbaum, 214 Mont. at 6, 692 P.2d at 413. The district court included the present value of Adam's remainder interest in the trust in the marital estate. Buxbaum, 214 Mont. at 7, 692 P.2d at 413. This Court affirmed, holding that even though Adam's interest was subject to divestmenthe could predecease his motherthe district court did not abuse its discretion by considering this interest in the marital estate. ¶ 36 In Marriage of Hill, Buxbaum, and Marriage of Meeks, the interest considered was a vested interest; that is, (1) the interest was limited to an ascertained person in being; and (2) that person's right to the estate was fixed and certain and did not depend on the happening of any future event. In Marriage of Hill and Buxbaum, the only event that could divest the spouse of his interest was if he predeceased the owner of the life interest. Likewise, in Marriage of Meeks, the spouse was sure to receive his interest in the trust corpus so long as he did not predecease his mother. However, this Court held that the spendthrift provision evidenced the intention of the settlor of the trust that the spouse's interest not vest until the trust proceeds were distributed. These cases all stand for the general proposition that only a vested remainder may be considered in evaluating the opportunity for future acquisition of assets or income under § 40-4-202, MCA, and that even where the interest is vested, the intent of the testator can render it contingent. ¶ 37 In this case, however, Andy's interest in the John G. Beadle Revocable Trust was not a vested interest. Bernadene had a life interest in the John G. Beadle Revocable Trust and the power to appoint by will the remainder of the trust among the couple's descendants. Only in the event that Bernadene did not choose to exercise her power of appointment would the trust corpus be distributed among John and Bernadene's children, including Andy. We noted in Marriage of Meeks, 276 Mont. at 244, 915 P.2d at 835-36, [g]enerally, a remainder will be considered contingent if the recipient is unknown or if the interest will only vest upon the occurrence of an event which is not certain to happen. Until Bernadene passed away, it was not known how the John G. Beadle Revocable Trust would be distributed, and the recipients of the interest were not known. ¶ 38 The District Court initially characterized Andy's interest as a vested interest, subject to divesture. However, prior to trial, Bernadene executed a codicil to her will, exercising her power of appointment to disinherit Andy. The District Court held that by reason of the divesture taking place, Andy no longer has any vested remainder interest in the John G. Beadle Revocable Trust. Unless the remainder interest is vested, it cannot be included in the marital estate. We determine that the District Court was correct in holding that a remainder interest can only be considered if it is vested, but that it incorrectly based its classification of Andy's interest on the status of Bernadene's will. The provisions of Bernadene's will only became significant at her death, when the power of appointment was exercised. Andy's interest remained contingent through trial and up until Bernadene's death in April 1998. ¶ 39 The parties also cite Goodmundson v. Goodmundson (1982), 201 Mont. 535, 655 P.2d 509, and Johnston v. Johnston (1991), 249 Mont. 298, 815 P.2d 1145. Unlike the cases discussed to this point, which involve a spouse whose parent has died and left him a future interest (vested or contingent), Johnston and Goodmundson involve the issue of whether the district court may include a spouse's possible inheritance in the marital estate, prior to the death of the devisor. We conclude it cannot. ¶ 40 In Johnston, 249 Mont. at 303, 815 P.2d at 1148, John Johnston argued that the district court erred in not including his wife Mary's expected future inheritance from her father in their marital estate. At trial, Mary's father testified that he had given Mary gifts inter vivos to provide for her comfort and to effectuate his estate plan. Johnston, 249 Mont. at 303, 815 P.2d at 1148. He then testified that Mary could expect a pittance of inheritance upon his death and that he intended to leave the bulk of his estate to charity. Johnston, 249 Mont. at 304, 815 P.2d at 1148. This Court held: Basing Mary's future acquisition on an inheritance to be received upon the death of her father is highly speculative and thus, inappropriate. We therefore hold that the District Court did not err regarding consideration of Mary's expected inheritance. Johnston, 249 Mont. at 304, 815 P.2d at 1148. ¶ 41 The holding in Johnston, 249 Mont. at 304, 815 P.2d at 1148, lends support to our analysis here. A will is a revocable instrument which does not take effect until the death of its maker. McReynolds v. McReynolds (1966), 147 Mont. 476, 414 P.2d 531. Thus, like Andy, Mary Johnston could not know whether she would have an interest in her father's estate until his death. Johnston, 249 Mont. at 304, 815 P.2d at 1148. Therefore, this Court concluded that her possible inheritance should not be included in the marital estate. Johnston, 249 Mont. at 304, 815 P.2d at 1148. ¶ 42 However, in Goodmundson, the district court considered the husband's sizeable expected inheritance in distributing the marital property. This Court affirmed, holding: Under section 40-4-202, MCA, the District Court must consider future acquisition of assets. The husband's expectation of a sizeable inheritance is therefore a valid consideration in the equitable distribution of the marital property. Goodmundson, 201 Mont. at 540, 655 P.2d at 512. Again, a will may be modified or revoked at any time prior to the testator's death and passes no interest until that time. McReynolds, 147 Mont. at 480, 414 P.2d at 533. The Goodmundson Court did not mention the type or value of interests involved or the extent to which the district court relied on the inclusion of the husband's expected inheritance. However, to the extent Goodmundson, 201 Mont. at 540, 655 P.2d at 512, holds that the value of an expected inheritance may be included in the marital estate, it is overruled. ¶ 43 We determine that Andy's interest in the John G. Beadle Revocable Trust was contingent and could not be ascertained until Bernadene's death. Therefore, the District Court did not err in excluding Andy's interest in the trust from the marital estate. We determine that our prior holdings in Marriage of Meeks, 276 Mont. at 245-46, 915 P.2d at 836; Buxbaum, 214 Mont. at 6-7, 692 P.2d at 413-14; and Marriage of Hill, 197 Mont. at 458-59, 643 P.2d at 586-87, stand for the proposition that only a vested interest may be considered in dividing in the marital estate and, even then, the testator's intent may convert the vested interest to a contingent one. Lastly, we hold that a spouse's possible inheritance is never properly included in the marital estate nor considered in dividing the marital estate and overrule Goodmundson, 201 Mont. at 540, 655 P.2d at 512. ¶ 44 Based on the foregoing, we affirm the decision of the District Court. TURNAGE, C.J., and REGNIER and NELSON, JJ., concur.