Darlene and Dave have been dating for a decade and lived together for most of that time. They purchased a home a few years ago; title to the home was under Dave’s name only due to Darlene’s credit history. Dave assured Darlene that they “owned the home together,” and Darlene has been contributing to the household expenses. Lately, the couple’s relationship has deteriorated. Darlene is concerned regarding what will happen to her contributions to the house if the couple should break up. Will she be protected?
For unmarried couples (particularly those who cohabit or those who own property together), protecting each party’s property and financial interests should be paramount. There are a number of options, which are explained below.
First, the parties may enter into an agreement regarding issues of property and finances. In one case, the Supreme Judicial Court enforced such an agreement between an unmarried couple who had been cohabiting for many years.1 The Court noted that “unmarried cohabitants may lawfully contract concerning property, financial, and other matters relevant to their relationship. Such a contract is subject to the rules of contract law and is valid even if expressly made in contemplation of a common living arrangement, except to the extent that sexual services constitute the only, or dominant, consideration for the agreement, or that enforcement should be denied on some other public policy ground.” 2
In the case of real or personal property which is owned jointly by the parties, the Probate and Family Court may order partition, making an equitable assignment of the property, its title, shares, and rights. The Court may also order an accounting.
Under some circumstances, the Court might order a constructive trust, which is an equitable remedy by which one party who has title to property has a duty to transfer title (or some rights) to another person who has been wronged. In one case, the Supreme Judicial Court considered real estate which was held solely by a man who had promised his live-in companion that they would own the property together. 3 “It would be unjust not to impose a constructive trust in this case,” the Court explained. “The plaintiff gave up her career as a flight attendant and undertook to maintain a home for the defendant while he advanced his career. She contributed her earnings and services to the home. The defendant’s assurances to the plaintiff that they would own the property together (although title would be taken only in his name), his later promises to transfer title to joint ownership, and the plaintiff’s reasonable reliance on those promises made by one in whom she reasonably placed special confidence call for the imposition of a constructive trust in the plaintiff’s favor[.]” 4
The parties may, of course, also establish an express trust regarding property they own. Any such trust must be in writing and comport with all requirements for a valid trust in Massachusetts.
What if the former partner has retained some property, or money, to which a party feels he or she is entitled? There are some potential claims that may arise here. Under some circumstances, a party may recover from a former partner under the theory of quantum meruit, claiming that the former partner has been unjustly enriched. If there is personal property which is wrongfully detained by a former partner, a party may also file an action for replevin, which would seek the return of that property.5
If you have any questions about domestic relations issues, you may schedule a free consultation with our office. Call 978-225-9030 during regular business hours or complete a contact form here, and we will get back to you at our earliest opportunity.
This question was recently answered by the Massachusetts Supreme judicial Court in Pfannenstiehl v. Pfannenstiehl, decided in August 2016. This case is extremely helpful for divorce practitioners dealing with trusts because the court explains the application of the law to a variety of trust concepts, such as spend thrift provisions, irrevocable trusts, ascertainable standards, all of which may be making your head hurt as you read this sentence.
Ultimately, the court concluded that whether a trust should be distributed as “marital property” depends on whether the trust benefit is speculative or alternatively whether it’s sufficiently certain. We will dive deeper into this analysis but essentially, the specific language of a trust must be analyzed to determine whether a spouse’s benefit due to one of the spouses should be considered part of the marital estate. Generally, if the benefit is so speculative that it is difficult (or impossible) to determine whether the spouse will actually get it sometime in the future, it probably will not be considered part of the marital estate. If, however, the benefit can be determined by some sort of ascertainable standard, then it more likely will be part of the marital estate and divided through equitable distribution.
This particular case was pretty fascinating because the husband and wife, without the existence of the trust, live a not uncommon upper-middle class lifestyle. The husband works for a family business, making about $190,000 a year. The wife worked part time as an ultrasound technician earning about $20,000 a year. She additionally received a few thousand dollars a year in rental income that was solely in her name. The parties have two children, one of whom has down syndrome, and so the wife seems to have tended more to the children. While they made a good living, the lifestyle they lived was significantly higher because of the husbands benefit from a family trust.
In 2000 for a trust was established by The husband’s father, funded by the father’s businesses, life insurance policies, and a cash account. The trust was irrevocable, meaning that the husband’s father wasn’t unable to dissolve it and take his money back. The beneficiaries of the trust were a class of people, of which the father was one of 11. Basically, the class was made up of all the husband’s father’s descendants. There were two co-trustees Who essentially had complete discretion on distributions. There was also a spend thrift provision which protected the beneficiaries from their creditors standing between them and their benefit.
In this particular case, the SJC found that the husband’s interest was too speculative to be included in the marital estate. That is pretty significant because the trial court had valued the husbands interest at over $2.2 million. The court found that because it was within the sole discretion of the trustees to distribute funds to the husband, it was speculative as to whether he would receive anything further in the future. That speculative nature didn’t, notably, mean that the court could not consider the trust interest in the equitable distribution, only that the court could not distribute that interest as part of the marital estate. The court also notably found that, although it had dispensed with an award of alimony, the court could reconsider that issue and potentially award alimony considering that trust interest would not be distributed as part of the marital estate.
So what does this all mean in plain terms? It means that if a trust benefit, like income from from a trust, can be determined and defined, it can generally be distributed as marital property. If it’s unclear whether the spouse will receive a trust benefit in the future, it would be too speculative to be part of the marital estate. In that situation, the court can still properly consider the interest, including the likelihood of a party receiving it in the future, when the court distributes the rest of the estate. The likely result is that, where it seems likely a party would get a sizable benefit in the future, although it may be speculative, the court would be more prone to giving the other spouse more of the marital estate. Same deal with alimony. Although a trust interest may be too speculative to give to either party, the court can consider the likelihood of the expected income in awarding alimony. So in this case, I’d imagine the trial court, when they get the case back to figure it out, will give more than half of the remaining marital estate to the wife to account for the likely benefit the husband will receive from the trust.
This case did a very good job of illustrating the vast discretion of the court, while defining the boundaries of the marital estate. Really, the overall finances of the family are always to be considered by the court. While the court can’t distribute something that is too speculative, the court can do other things to balance the speculative nature of an interest and whether one spouse will likely receive it. There were many lessons from this case and we will continue to discuss it on this blog.
Once again the complexity in family law cases is illustrated by the Supreme Judicial Court. And when financial issues become complex, having a great divorce lawyer becomes essential. If you have trust interests at issue in your case, consider scheduling a free consultation with our team of divorce attorneys. Schedule yours today by calling 978-225-9030 during regular business hours, or complete this contact form and we will contact you back at our earliest opportunity.