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We previously alerted readers to a troubling ruling out of Massachusetts that could impact estate planning across the country (Jones v. Jones, 103 Mass. App. Ct. 223 (2023)).  Connecticut now has its own similar case, Gervolino v. Gervolino, that echoes the troubling analysis of the Massachusetts case, with broad language that runs counter to core tenets of trust law and that highlights the risk of divorce for estate planners and their clients.  Of most concern, the Connecticut court in Gervolino ruled that a credit shelter trust created on the death of the husband’s late father for the primary benefit of the husband’s (living) mother is a present asset of the husband’s marital estate and subject to “distribution” in the divorce.

Case Summary

In Gervolino, the Superior Court began with a basic recitation of Connecticut law of “marital property.” We note that Connecticut, unlike certain other states, does not have separate classifications of “marital property” and “nonmarital property,” which the court in Gervolino describes as an “‘all-property’ equitable distribution scheme.”

The court in Gervolino considered whether three trusts created by the husband’s parents were properly considered in the husband’s divorce action.  Shockingly, the court concluded that two of the three trusts “are marital property . . . and are subject to distribution.”

Although it is difficult to understand the precise trust terms based on the opinion, it appears that the husband’s mother, who is alive, is the lifetime beneficiary of two of the three trusts, which were created for her benefit by the husband’s late father.  Most obviously, a credit shelter trust was funded on the death of the husband’s late father, and the late father also created an irrevocable insurance trust that would seem to benefit the mother during her lifetime.  We presume, based on the court’s opinion, that the corpus of those trusts will be divided and distributed outright to descendants on the mother’s death.  (We note again that the mother is still alive and, in fact, testified in the divorce action.)

The court’s analysis echoes the troubling Jones case in Massachusetts.  The Connecticut court noted a prior case finding that a divorcing spouse “had a vested interest in each trust that was only subject to her surviving her mother.”  The court noted the analysis of another prior case that the divorcing spouse (not surprisingly!) was younger than his parent, concluding that the remainder interest was “vested” with the “only requirement” for receipt of that interest being “that he survive his mother.”

This analysis will strike estate planners as confused.  Nevertheless, the court concluded that the husband’s remainder interests in the credit shelter trust and the family’s insurance trust “are vested and irrevocable and, as such, distributable property in this divorce action.”

The surprises do not stop there.  The court then simply took the present portfolio value of the trust assets and, because the divorcing spouse is one of three siblings, divided the current portfolio value in 3, assigning a one-third value to the husband’s assets!

As for the third trust, which was a life insurance trust created by the husband’s mother, the court concluded that the husband’s interest was too speculative to be valued, and therefore would not be considered in the divorce.  It is difficult to make sense of this conclusion in light of the prior conclusions, because it would seem that the husband is a present beneficiary of his mother’s insurance trust, whereas he is a remainderman of the other two trusts.  In any case, the court wrote that the ultimate disposition of the trust “is contingent upon the language of the mother’s will which can be changed at any time.”  That analysis seems incorrect for a trust created by the mother, as grantor, and the court does not reference a power of appointment.  Nevertheless, the court credited the mother’s testimony that the ultimate distribution of her insurance trust will be handled “according[] to my will,” and the court simply moved on.

Why is this Important?

Estate planners will have difficulty reconciling the analysis of Gervolino with traditional tenets of trust law.  As we noted in connection with the Jones case, asset protection trust planning remains one of the best protections for family wealth.  These cases reinforce the need for deeper conversations with clients seeking to protect family assets.  That conversation could include a discussion of the wildcards – for example, a child moving to another state, and a court misinterpreting a trust – and the best practices around trust administration, including not allowing a trust (or other family money) to be a primary source of support for the marriage.  And, of course, that conversation should emphasize the value of prenuptial agreements as a backstop to trust planning.

Consider speaking with your Wiggin and Dana attorney to determine how best to address the concerns highlighted in this advisory to reduce exposure of your estate plan to divorce actions.