Court Opinion

ID: 9728019
Source: CourtListenerOpinion
Date Created: 2023-08-26 13:55:33.225474+00
Date Added: 2024-06-11T18:25:45.003649
License: Public Domain

CANE, P.J.
(concurring). I concur separately only on the issue of whether the income from the main trust was gifted property or property subject to division in this divorce action as part of the couple's marital estate. I think it can be analyzed in a very simple fashion. In addition to approaching this issue from the control aspect, I view this issue from a different perspective, namely, the intent of the donor.
It is undisputed that Diane's father set up a trust that had two parts, income and principal. The principal was to be distributed to Diane upon her reaching certain ages. Additionally, and most importantly, the father elected to treat the income from the trust separately. Both sides agreed at oral argument that the father had the power to, and in fact did, set up the trust so that the trust income could have been distributed *303separately to anybody. However, in this instance he elected to arrange for the trust income to be distributed to Diane. If Diane’s father had directed that the trust income be distributed to a third person such as John Doe, I do not think there is any question that we would view the distribution to John Doe as a gift. The fact that the father elected to arrange for the trust to distribute the income to his daughter Diane should not make it a non-gift.
Unlike Arneson, where the inheritance is the stock and ownership of the generated income is automatically imputed to the owner, the trust in this case purposefully separates the ownership of the trust income from the principal. When one bequeaths or gifts a stock, the generated income cannot be separately bequeathed or gifted. On the other hand, when a trustor establishes a trust, the income and principal can be distributed separately and to different beneficiaries. I understand that in most trusts, you have by its very nature generated income and also principal which is generally distributed later. However, it is this very feature that makes it different from other assets and allows the trustor to gift the income and principal separately. Therefore, when the trustor establishes a trust so that the income and principal are to be treated and distributed separately, as in our case, we should view it as separate gifts.
Consequently, I view this trust as establishing two gifts, namely the income and principal. Therefore, I would conclude the income was gifted property, but subject to losing its character or identity through commingling with divisible property as we discussed in the main opinion.