Marriage of Terry
22CA2005
| Colo. Ct. App. | Aug 22, 2024Background
- Frederick Terry (“husband”) and Michelle Terry (“wife”) married in 2003; during the marriage, husband was a beneficiary of the irrevocable Frederick S. Terry 2000 Trust, established by his father.
- The original trust terms required mandatory distributions of principal to husband in 2015, 2025, and 2035, and was to be interpreted under Massachusetts law.
- After husband filed for dissolution in 2020, the trustee attempted to amend the Trust to make distributions discretionary rather than mandatory.
- The trial court initially agreed with husband that the amended Trust was not “property” under Colorado’s Uniform Dissolution of Marriage Act (UDMA), but later reversed course, finding the amendment invalid and ruling that husband’s interest in the trust was a vested property interest subject to marital division.
- The trial court ordered husband to pay wife a percentage of future net trust distributions, reflecting the marital increase in trust value accrued during the marriage.
- Husband appealed the property division and related orders.
Issues
| Issue | Terry's Argument | Michelle's Argument | Held |
|---|---|---|---|
| Whether husband's trust interest is UDMA property | Trust (after amendment) is not property under UDMA | Trust is a vested property interest under UDMA | Husband's pre-amended vested interest is property subject to UDMA |
| If Trust is property—a marital or separate asset? | Trust value increase is not marital property | Marital appreciation is marital property | Marital increase in trust value is marital property |
| Validity of trustee’s attempted amendment | First Amendment valid under MA law | Amendment invalid; trust not amendable as attempted | First Amendment invalid; amendment violated trust's plain language |
| Joinder of trustee required to adjudicate dispute | Trustee indispensable party; court lacked jurisdiction | Trustee not indispensable; issue is between spouses | Trustee not needed—court only determined parties’ rights/obligations |
| Spendthrift clause blocks division of trust | Spendthrift precludes division of trust or payments | Spendthrift no bar to division of beneficial interests | Spendthrift clause no bar to court’s order on net distributions |
Key Cases Cited
- In re Marriage of Balanson, 25 P.3d 28 (Colo. 2001) (establishes standard for determining whether trust interests are property under UDMA)
- In re Marriage of Cardona, 316 P.3d 626 (Colo. 2014) (requires focus on enforceable rights in classifying property)
- In re Marriage of Jones, 812 P.2d 1152 (Colo. 1991) (distinguishes between discretionary and vested interests in trusts for property classification)
- Lauricella v. Lauricella, 565 N.E.2d 436 (Mass. 1991) (holds spendthrift clauses do not bar division of trust interests in marital estates)
- Denver Foundation v. Wells Fargo Bank, N.A., 163 P.3d 1116 (Colo. 2007) (court reviews trust interpretation questions de novo)