A Conveyance of Real Property to an Irrevocable Marital Trust is not a Marital Asset Subject to Equitable Distribution

In Nelson v. Nelson, No. 2D15-4585, 2016, (Fla. 2nd DCA 2016), the Former Husband purchased a home in Palm Desert, California and titled it in both his and the Former Wife, Leah W. Nelson, names. The parties later transferred the California home to the Leah W. Nelson Marital Trust, which was an irrevocable trust established by the Former Husband in 2010 to benefit the Former Wife and her descendants. The Former Wife was the sole trustee of the trust. This case arises from the Former Wife’s claim that the trial court erred by characterizing the California home as a marital asset that was subject to equitable distribution.

Upon the Appellate Courts de novo review, the court found that the trial court properly construed the Trust as irrevocable. The courts findings come from Section 736.0602(1), Florida Statues (2015) which provide that a settlor may “revoke or amend” a trust unless “the terms of [the] trust expressly provide that the trust is irrevocable.” The terms of the Trust state that the Former Husband ” waive[s] all right, power and authority to alter, amend, modify, revoke or terminate this trust instrument and the trust hereby evidenced.” Further, the Trust does not contain a provision dissolving the Trust upon divorce. Therefore, the court finds that the Former Husband created an irrevocable trust for the benefit of the Former Wife and her descendants.

After determining that the Trust is irrevocable, the court now moves on to review de novo the trial courts characterization of the California home, as a marital asset subject to equitable distribution.  61.075, Fla. Stat. (2015) guides the trial court’s equitable distribution of assets upon dissolution of marriage “[a]ssets acquired…..during the marriage, individually by either spouse or jointly by them.” Nonmarital assets include “[a]ssets acquired … by either party prior to the marriage, and assets acquired … in exchange for such assets ….” 61.075(6)(b)(1). The Florida Statue also creates a rebuttable presumption that assets acquired by either spouse during the marriage are presumed to be marital assets. This presumption can be overcome by a showing that the assets are nonmarital assets 61.075(8).

The Former Husband argued that he presented unrebutted testimony that “the Trust was created as an estate planning mechanism intended to protect the California home from claims made by his heirs in the event he was to predecease the Former Wife during the marriage.” He asserted that “the purpose of the establishment of the Trust is no longer necessary now that the parties have divorced and contends that section 736.04113 authorized the trial court to modify the Trust and thus reach the assets of the Trust for the purpose of equitable distribution.”  The court declines the Former Husband’s argument to construe 736.04113 in that manner due to the unambiguous language.

Furthermore, the record lacked any evidence that the Former Wife, who was the trustee, or the Former Wife’s daughter, who is the beneficiary of the Trust, requested modification or termination of the Trust. Absent this request for modification requesting termination of the Trust the language of section 736.04113 produces only one result in which the trial court had no authority to modify the Trust and reach the California home, which is an asset of the irrevocable Trust.

The court found that although the California home became a marital asset pursuant to section 61.075(6)(a)(1)(a) when the Former Husband purchased the home, the home ceased in character to be a marital asset upon its transfer into the Trust. When the California home was transferred into the Trust, the home became part of the assets of the Trust, and should be viewed as a distinct asset from the Former Husband and Former Wife. Transferring the California home into the Trust put the home beyond the court’s reach and therefore the appellate court reversed the trial court’s equitable distribution and remanded with instruction for the trial court to address the equitable distribution of the marital assets.

NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

If you or anyone you know is in need of representation in actions involving Guardianship, Probate and/or Trust Disputes, or questions pertaining to such proceedings, please contact The Law Offices of Glenn M. Mednick, P.L., at (954) 315-1154 or gmednick@mednicklawgroup.com.