April 23, 2008

New Case Law: Division of trust interest

As Portland Oregon based lawyers representing divorce and family law clients, we are always interested in what guidance the Oregon Court of Appeals gives us on dividing specific types of property at divorce. With many types of assets, it is relatively easy to predict what a court will do (the marital home, retirement accounts where there are kids, etc.) In our experience, divorcing couples have more difficulty reaching an agreement on the division of inherited property and trust property.

On April 23, 2008, the Oregon Court of Appeals published an opinion in Brown and Albin that sheds some light on the division of trust assets between divorcing spouses.

In Brown and Albin, husband had two family trusts created by husband’s father and grandmother. The trusts were created before the couple’s 24 year marriage, and husband didn’t receive anything from the trusts until late in the marriage. The parties used part of one trust to finance the purchase of the marital home. The parties contemplated early retirement off of the trust income, and the eventual payout from the trusts. The trial court, in ruling that husband’s trusts had been “completely integrated into the financial planning of the parties” awarded wife an interim spousal support payment, and 1/2 of the income from the trusts, payable as spousal support, and 1/2 of the eventual payout from one of the trusts. Husband appealed, arguing that the court erred in awarding spousal support, and that the court erred in awarding wife any interest in the trusts.

The court, citing ORS 107.105(1)(f) stated its overreaching consideration is that the division of property be “just and property in all the circumstances.” There is a rebuttable presumption that property acquired during the marriage (a “marital asset”) be divided equally. The court agreed with husband that he had rebutted the presumption that wife had equally contributed equally to the acquisition of the trusts, but went on to hold that it was just and proper to divide the trusts equally between the parties. The reasons given were that husband’s trust interests had been “completely integrated into the financial planning of the parties”, and the marriage was of long duration.

The Court of Appeals still awarded Wife one-half of the trust interest and proceeds, but removed termed it a property division rather than a spousal support award. The court’s reasoning was that under ORS 107.105, the statute that provides the authority for a court to grant a spousal support award, a court is not authorized to award property as spousal support. Trust interest is a property interest.

You can review the full opinion in Brown and Albin at http://www.publications.ojd.state.or.us/A129850.htm.

If you have any questions about appeallate law, attorney fees or any family law or divorce legal issue, please contact Daniel Margolin or C. Sean Stephens at Stephens & Margolin LLP