Ferri v. Powell-Ferri
476 Mass. 651
| Mass. | 2017Background
- Paul J. Ferri settled an irrevocable Massachusetts trust for his son (the 1983 Trust); Ferri Jr. was the sole beneficiary. The trust granted trustees broad discretion to “pay to or segregate irrevocably” income and principal and contained a spendthrift/anti-alienation clause and staged beneficiary withdrawal rights beginning at age 35 and reaching 100% at 47.
- During Ferri Jr.’s divorce proceedings (Connecticut), the 1983 Trust trustees created a new spendthrift Declaration of Trust (2011 Trust) and transferred substantially all 1983 Trust assets into it without informing or obtaining consent from Ferri Jr.
- Connecticut trial court struck an affidavit from the settlor offered by the trustees, held decanting invalid, ordered restoration of 75% of 2011 Trust assets, accounting, and fees; trustees appealed and the Connecticut Supreme Court certified three questions to the Massachusetts Supreme Judicial Court concerning decanting authority, remedy, and admissibility of settlor affidavit.
- Massachusetts SJC analyzed trust language, decanting doctrine (as adopted in Morse v. Kraft), anti-alienation and withdrawal provisions, and the settlor’s postexecution affidavit to ascertain settlor intent.
- The Massachusetts SJC answered: Q1 (Did the 1983 Trust empower trustees to decant to the 2011 Trust?) — Yes. Q3 (May court consider settlor affidavit to determine intent about decanting?) — Yes. It did not answer Q2 (remedy/return of assets) because Q1 was answered affirmatively.
Issues
| Issue | Plaintiff's Argument (Powell-Ferri) | Defendant's Argument (Trustees/Ferri) | Held |
|---|---|---|---|
| 1. Did the 1983 Trust authorize trustees to decant substantially all assets into the 2011 Trust? | Trust language and beneficiary withdrawal rights preclude decanting; decanting impairs beneficiary rights and was used to frustrate marital claims. | Trust grants extremely broad discretion to pay or “segregate irrevocably” and other plenary powers; language and settlor intent permit decanting. | Yes — the trust read as a whole demonstrates settlor intent to permit decanting. |
| 2. If decanting unauthorized, should 75% or 100% of 2011 Trust assets be returned to 1983 Trust? | Restoration requested by Powell-Ferri as remedy for unauthorized transfer. | Trustees argued decanting valid; remedy question contingent on negative answer to Q1. | Not answered (court declined to reach remedies after answering Q1 "Yes"). |
| 3. May a court consider a settlor’s affidavit about intent when interpreting whether the settlor intended to permit decanting? | Affidavit should be excluded where it alters trust terms or is postexecution and self-serving. | Affidavit is admissible extrinsic evidence where ambiguity exists and supports settlor intent to empower trustees to protect trust assets (including by decanting). | Yes — where ambiguity exists, a settlor’s affidavit is admissible to clarify intent and here it supports decanting authority. |
| 4. Do beneficiary withdrawal rights or anti-alienation clause bar decanting? | Withdrawal rights and anti-alienation clause show settlor intended beneficiary access and creditor protection that are inconsistent with decanting to a spendthrift trust. | Withdrawal rights and anti-alienation clause are consistent with trustees’ duty to protect assets; withdrawal mechanism applies to assets not already distributed; trustees retain legal title and fiduciary duties. | Court held withdrawal and anti-alienation provisions do not prevent decanting when trust read as a whole; decanting consistent with settlor’s intent. |
Key Cases Cited
- Morse v. Kraft, 466 Mass. 92 (Mass. 2013) (recognized decanting authority may be implied from broad trustee distribution powers)
- Mazzola v. Myers, 363 Mass. 625 (Mass. 1973) (trust interpretation is a question of law)
- Bank v. Thermo Elemental Inc., 451 Mass. 638 (Mass. 2008) (rules on contract ambiguity and use of extrinsic evidence)
- Hillman v. Hillman, 433 Mass. 590 (Mass. 2001) (interpret trust language in context to discern settlor intent)
- Watson v. Baker, 444 Mass. 487 (Mass. 2005) (construct trust to effect donor’s intent from whole instrument and circumstances)
- Loring v. Karri-Davies, 371 Mass. 346 (Mass. 1976) (interpretation of similar trust language)
- McClintock v. Scahill, 403 Mass. 397 (Mass. 1988) (trustee holds full legal title and rights of possession)
- Rothwell v. Rothwell, 283 Mass. 563 (Mass. 1933) (trustee duties continue after termination until property conveyed)
- Walker v. Walker, 433 Mass. 581 (Mass. 2001) (allow reformation and use of drafter’s affidavit to show instrument inconsistent with settlor’s intent)