Lead Opinion
¶ 1. Plaintiff wife appeals the family court’s final judgment order in this divorce proceeding. Wife makes the following three arguments on appeal: (1) the family court abused its discretion by granting husband’s motion in limine excluding evidence of any revocable trusts or wills under which he may be a beneficiary; (2) the family court abused its discretion when it refused to include as marital property suitable for distribution two irrevocable trusts of which husband is a beneficiary; and (3) the family court abused its discretion by nullifying husband’s maintenance arrearage of $8,312.74. For the reasons set forth below, we reverse and remand.
¶ 2. The material facts are undisputed. The parties were married on June 8, 1985, and they had been married for twenty-four years at the time of their final divorce hearing. The parties have three children, one of whom is a minor.
¶ 3. By agreement of the parties, wife was not regularly employed and stayed
¶ 4. The parties’ financial situation is meager. One of the primary reasons for their strained finances is the decision they made to send all three children to private boarding schools once they reached the seventh grade. As a consequence of this expense, virtually no equity remains in any of the parties’ jointly acquired assets, nor do they have any money saved for retirement. In addition, the parties have significant debt. The parties’ relatively bleak financial situation was exacerbated during the marriage by poor business and real estate decisions.
¶ 5. At the time of divorce, the parties had few assets of great value. Their most significant asset was husband’s partial interest in his parents’ home, which was placed in a qualified residence trust in 1997 and which had since vested in the beneficiaries, that is, husband and his three siblings. The Town of Woodstock’s assessed value of the home is $1,180,500. No other evidence of the value of this asset was presented to the family court, nor was any' evidence introduced as to the value of husband’s interest in the property — a one-quarter discounted interest, at best. Because of the lack of evidence, the family court concluded that it could not make a reasonable finding regarding the actual value of husband’s interest in his family’s property.
¶ 6. Besides husband’s interest in the home, the family court found that the parties held five additional assets of value. The first of these was husband’s 0.5% ownership interest in Gillingham’s. The family court found there was no evidence presented as to the value of this interest. The second was husband’s ownership of approximately 5.5% of the stock of a company named Swift Properties, Inc. The family court again found that the value of this small interest was unknown. The next asset was husband’s ownership of approximately 0.247% of a company called Barberry Hill Corporation, an interest that husband shared jointly with his mother and that was not valued by either party at the family court. The fourth additional asset included ownership interests in two businesses, Billings and Sons, Inc. and Bridgewater Mill, LLC, which own commercial condominium spaces in Bridgewater, Vermont. Billings and Sons was owned by both husband and wife, while husband owns 60% of Bridgewater Mill, LLC with a separate business partner. Wife provided no evidence of the value of these' properties. Husband calculated that his interest in the properties was worth $723,620 against which there was a debt of $855,512, leaving a total debt of $131,892. The final remaining asset is a life insurance trust fund, funded by husband’s father. It is a term life insurance fund of unknown value, and husband is one of multiple beneficiaries. The family court noted that the assets attributable to the marriage were, for the most part, gifts from the husband’s
¶ 7. Besides marital assets, the parties had significant personal debt at the time of their divorce. The total balance of unsecured personal debt was approximately $170,070. Overall, the family court found that “[t]he crippling extent of the personal debt is hard to reconcile with the family income.” The family court gave some weight to husband’s testimony that wife had a tendency to spend excessively and to take on debt beyond their capacity to repay it. However, the family court made clear that it considered the parties’ dire financial situation “a joint responsibility.”
¶ 8. The family court distributed the parties’ significant assets as follows. Property deemed to be of minimal or unproven value that was given to the couple by the husband’s family was awarded to husband. This included: the Gillingham’s stock, the interest in Swift Properties, the interest in Barberry Hill, the interest in Billings and Sons and Bridgewater Mill, LLC, and the partial interest in husband’s father’s life insurance trust. The family court also awarded husband the interest in his parent’s home because it could not value the asset given the available evidence and because of “the limited utility of the asset, [its] current lack of ability to be sold and its familial provenance.” Wife was awarded the three jointly owned shares of the Woodstock Aqueduct Company, while the two solely owned shares were awarded to husband. The court assigned approximately $125,000 of the parties’ debt to husband and $45,000 to wife. In consideration of the high debt obligation assigned to husband, the family court nullified his arrearage obligation of $8,312.74, which he owed to wife under their temporary spousal maintenance order. Lastly, the family court awarded wife $5,000 held by her attorney.
¶ 9. In addition to distributing marital property, the family court also awarded wife permanent spousal maintenance. The family court arranged this maintenance as follows: $2,500 per month until April 1, 2010; $2,000 per month from April 1, 2010 until December 1, 2013; $2,700 per month from December 1, 2013 until December 1, 2016; and $3,000 per month thereafter.
¶ 10. On the first day of the parties’ divorce hearing, husband submitted a motion in limine seeking to exclude evidence, whether documentary or testimonial, of any revocable trusts or wills of which he might be the beneficiary. The court granted this motion; thus in allocating marital property and awarding maintenance, the family court considered no evidence related to husband’s possible opportunity for the acquisition of future assets through inheritance from wills or trusts.
¶ 11. This Court reviews family court judgments in divorce proceedings under an abuse of discretion standard. “When fashioning an equitable award, the [family] court must explain the underlying rationale for its decision, which we will not disturb absent a showing that the court abused its discretion.” Wade v. Wade,
¶ 12. On appeal, wife first argues the family court abused its discretion by granting husband’s motion in limine because this decision improperly excluded
¶ 13. We first address wife’s claim that the family court abused its discretion by granting husband’s motion in limine. We agree with husband that any interest he has as beneficiary under a will or revocable trust is not marital property if the testator or settlor is still alive. We agree, however, with wife that such a beneficial interest can be considered in allocating marital property between the parties if it creates an “opportunity ... for future acquisition of capital assets and income” under 15 V.S.A. § 751(b)(8).
¶ 14. As an initial matter, husband argues that objections to the grant of the motion in limine were not preserved because wife failed to raise the issue in the questioning of husband’s parents. We have never ruled that in all circumstances a party against whom a motion in limine has been granted must further contest the decision by seeking to admit the excluded evidence at trial. As we held in State v. Blair:
The grant of the motion in limine was a ruling excluding evidence and thus is governed by V.R.E. 103(a)(2). That rule states that error can not be predicated on a ruling that excludes evidence “unless a substantial right of the party is affected” and in the case of a ruling excluding evidence, “the substance of the evidence was made known to the court by offer or was apparent from the context within which questions were asked.”
¶ 15. Husband argues that attempting to admit the evidence at trial is required by our decision in State v. Carrasquillo, in which we held, under the specific circumstances of that case, that renewal at trial was required.
¶ 16. The difference between this case and Carrasquillo is apparent from our recent decision in State v. Memoli,
¶ 17. Husband also argues that wife waived the issue because husband’s father and mother refused to answer questions about revocable trusts and wills during their depositions and wife never moved for a court order compelling them to answer. Husband never made this argument below, even though it was husband, not wife, who sought a ruling on the admissibility of the evidence in the trial court. We have never held that a party loses the right to introduce relevant evidence because the party failed to pursue the evidence in discovery. There is no merit to husband’s waiver argument.
¶ 18. Turning to the content of the motion in limine, we first hold that the family court determined correctly that any revocable trusts or wills under which husband may be a beneficiary are not marital property to be distributed by the court. Under 15 V.S.A. § 751(a), “[a]ll property owned by either or both of the parties, however and whenever acquired, shall be subject to the jurisdiction of the court. Title to the property, whether in the names of the husband, the wife, both parties, or a nominee, shall be immaterial . . . .” Although we have not addressed the issue, the near unanimous holdings around the country are that a beneficiary’s interest under a will is not property before the death of the testator, but instead is only an expectancy that is not subject to the jurisdiction of the family court. See 2 B. Turner, Equitable Division of Property § 6:91, at 476 (3d ed. 2005); see also Krause v. Krause,
¶ 19. Wife does not appear to contest this result as to interests created by will but argues that interests created by revocable trusts should be treated differently. We disagree. In 2009, Vermont adopted a version of the Uniform Trust Code as Title 14A of Vermont Statutes Annotated. See 14A V.S.A. § 101 (title is known as the Vermont Trust Code); § 102, Official Comment (source is the Uniform Trust
¶ 20. While we agree with husband that his beneficial interest in the revocable trust is not marital property, that determination does not end the issues before us. Wife argues that the presence of a revocable trust, even if not creating marital property, may be considered in arriving at an equitable distribution of the marital property. Wife relies for this position on 15 V.S.A. § 751(b)(8), which provides, “[i]n making a property settlement the court may consider all relevant factors, including but not limited to: . . . (8) the opportunity of each [party] for future acquisition of capital assets and income.” Wife argues that the revocable trust is, at a minimum, an opportunity for husband to acquire capital assets in the future and the court erred in granting the motion in limine that prevented her from introducing evidence of that opportunity.
¶ 21. Other jurisdictions are split on whether the expectation that a spouse may receive assets by testamentary devise or revocable trust
¶ 22. We have never addressed this issue directly, but we recently considered the handling of a future inheritance in Mizzi v. Mizzi,
¶ 23. We conclude that consideration of likely receipt of future inheritances and trust assets or proceeds may be considered under § 751(b)(8). The statute does not distinguish between different opportunities based on the means by which the opportunity is created. See B. Turner, Future Gifts and Inheritances as a Factor in Dividing Marital Property, 18 No. 10 Divorce Litig. 165 (2006). Necessarily, future assets to be considered under that subsection are not marital property; otherwise they would be distributed between the parties. Thus, the fact that the beneficiary interest is merely an expectancy during the life of the testator or settlor prevents that interest from being marital property but does not prevent it from being considered under § 751(b)(8). Indeed, because a property distribution cannot be modified where a change of circumstances occurs, it is necessary to have a grasp of predicted future circumstances to bring about a fair result. See Krize v. Krize,
¶ 24. Depending upon the circumstances, the court can find that future
¶ 25. The dissent argues that there is a difference between types of expectancies, and that the Legislature provided for consideration of certain types of expectancies and not others. There is nothing in the statutory language to support the dissent’s distinction — the issue is whether the spouse has an “opportunity” for future acquisition of assets and income, not the source of that opportunity.
¶ 26. Our reversal on the issue of the motion in limine requires that the family court’s property distribution decision be reconsidered. Because the property distribution and maintenance decisions are interrelated, we similarly remand the maintenance decision for reconsideration. See Kanaan v. Kanaan,
¶ 27. Wife has challenged two additional parts of the court order — the valuation and distribution of the irrevocable trust interests and the cancellation of the maintenance arrearage. The first challenge raises primarily a question of law that will be present even if the property distribution is modified. We address that issue of law. The second challenge, involving the maintenance arrearage, is to a part of the property distribution that may be changed. Nevertheless, we address the legal issue raised for guidance to the trial court on remand.
¶ 28. Wife argues that the family court improperly refused to include as marital property suitable for distribution the two irrevocable trusts of which husband is a beneficiary. These two trusts include husband’s parents’ qualified personal residence trust and his father’s life insurance trust, both of which the family court awarded to husband. We agree with wife that husband’s beneficial interest in the trusts is marital property. See 15 V.S.A. § 751(a) (“All property oumed by either or both of the parties . . . shall be subject to the jurisdiction of the court.” (emphasis added)); Chilkott,
¶ 29. We do not agree, however, that the family court concluded they were not marital property. In its findings of fact, the family court discussed husband’s interest in both trusts after the general statement that “[t]he parties have few assets of significant value.” That the family court discussed the interests in these trusts as being husband’s interests does not indicate that it did not consider them part of the marital estate under 15 V.S.A. § 751(a); it merely means that the court correctly understood that husband, and not wife, was the named beneficiary of these trusts. Neither does the fact that the family court ultimately decided to distribute the interest in these trusts to husband indicate that the court determined the trusts were not part of the marital estate. This distribution merely means that the family court determined it was equitable to allocate these assets to husband as part of the division of the marital estate.
¶ 30. In distributing the two irrevocable trust assets, the family court determined that it had insufficient evidence to determine the value of either interest. Wife claims that the family court’s conclusion was error under our decision in Chilkott, where we determined that the husband’s interest in an irrevocable trust was not so remote that it had no “ascertainable present value.”
¶ 31. Lastly, we address wife’s contention that the family court abused its discretion when it nullified husband’s maintenance arrearage of $8,312.74. Wife claims that the family court’s nullification was error for two reasons — the arrearage was the product of husband’s “flagrant disregard” for a court order, and the arrearage placed wife in severe financial hardship. Despite wife’s claims, the court specifically noted that the arrearage was “in consideration of the high debt obligation assigned to [husband], and in consideration of his financial contribution to the outstanding obligations.” This Court has allowed the family court to allocate debt between divorcing parties. See Sullivan v. Sullivan,
Reversed and remanded for reconsideration of the property distribution and maintenance award consistent with this opinion.
Notes
Although we have not decided the question directly, we note that in Chilkott v. Chilkott,
Although wife has focused on husband’s interest in a revocable trust, we see no reason to distinguish between a revocable trust interest and a testamentary interest.
The Vermont language is based on § 307 of the Uniform Marriage and Divorce Act.
These citations are to three-justice decisions because many of our appeals from divorce judgments raising issues with respect to property distributions are considered by a three-justice panel. We do not cite these decisions as precedent, but instead to show the extent that § 751(b)(8) is relied upon in property distribution decisions. These decisions are available at http://www.vermontjudieiary.org/ d-upeo/upeo.aspx.
This is not a holding that the terms of wills and revocable trusts must be made public when they are introduced in evidence. They may be subject to sealing pursuant to the Rules for Public Access to Court Records Rule 7(a) to protect the privacy interests of the testator(s) or settlor(s).
The dissent relies heavily on the reasoning in Rubin v. Rubin,
Concurrence Opinion
¶ 32. concurring and dissenting. I agree with the majority’s holding that a beneficial interest in a revocable trust is essentially equivalent to an interest in a will, and therefore a mere “expectancy” that must be excluded from the marital estate. Ante, ¶ 18. I disagree with its corollary holding that such an “expectancy” may nevertheless be considered in dividing the marital property. If speculative interests of this nature are unworthy of being included within the marital estate, I see no grounds for their legitimate consideration in assessing a party’s “opportunity ... for future acquisition of capital assets and income.” 15 V.S.A. § 751(b)(8). To predicate a division of marital property upon an interest “revocable at the will of the settlor, at any time and for any reason,” In re Marriage of Githens,
¶ 33. The majority asserts that excluding a revocable-trust interest from the marital estate “does not prevent it from being considered under § 751(b)(8).” Ante, ¶ 23. The rationale offered for this distinction is that the “opportunity” for capital acquisition requires only a “likelihood” of occurrence, not a “certainty.” Ante, ¶ 21. This reasoning is unpersuasive. To be sure, nothing is ever certain, and courts must have some leeway to prognosticate the future acquisition of assets and income. But those factors that have traditionally been cited as evidence of a party’s superior opportunity to earn and accumulate — a successful business, vested pension, professional degree or training, skilled work experience, and the like — all generally lie within the party’s application and control. This stands in sharp contrast to the absolute uncertainty inherent in a beneficial interest subject to revocation by a third party completely outside the control of the beneficiary, “at any time and for any reason.” In re Githens,
¶ 34. This absolute uncertainty explains why many courts have categorically rejected the notion that a mere “expectancy” under a will or a revocable trust may constitute a legitimate consideration in dividing marital property. The Connecticut Supreme Court’s decision in Rubin v. Rubin,
¶ 35. The court went on to hold that such expectancies could not be considered in any respect in dividing the estate or awarding alimony. Id. at 1190. While acknowledging that family courts must often fashion awards “contingent upon some future event,” the court concluded that this discretion did not extend to an expectancy that “may never be realized because of diminution of the donor’s wealth or a change in the planned disposition of his property.” Id. at 1189. Indeed, to conclude otherwise, the court observed, would be to “sanction[] in a different guise an assignment of property not . . . within the jurisdiction of the court.” Id. at 1190.
¶ 36. Ultimately the court’s conclusion was grounded upon considerations of reason and fairness. “To base a division of property, which is not ordinarily subject to modification, upon the possibility of a future inheritance might often prove to be unfair in the light of subsequent events.” Id. at 1191. While some uncertainty about future events is unavoidable, such decisions “should not,” the court explained, “be premised upon predictions as to future
¶ 37. Other courts have reached similar conclusions. See, e.g., In re Marriage of Beadle,
¶ 38. The majority asserts that “because a property distribution cannot be modified where a change of circumstances occurs” it is all the more necessary to predict “future circumstances to bring about a fair result.” Ante, ¶ 23. The majority suggests that this somehow supports its holding, but the opposite is true: it is precisely the permanent nature of a property award that dictates against the consideration of such inherently speculative interests as revocable trusts, which turn entirely on circumstances beyond the party’s control and may never eventuate. Some uncertainty is unavoidable. Yet, as the Rubin court recognized, where an award is based “upon a possible inheritance, which may never materialize in any form or at any time remotely corresponding to the trial court’s assumptions, the risk of inequity is substantially greater.”
The majority’s response is to reject any statutory basis for excluding expectancies that are beyond the beneficiary’s control because the statutory language “on its face is only probabilistic.” Ante, ¶ 25. The argument proves too much, since taken to its logical conclusion the trial court would have no authority under the statute to exclude any alleged expectancy or opportunity so long as there was any likelihood of its fruition. On the contrary — and abstract “metaphysical” considerations aside — ante, ¶ 25, experience and ample authority support a principled distinction between opportunities over which a party has some — albeit not complete — control and others over which a party has little or none.
The majority’s suggestion that we endorsed a contrary approach in Mizzi v. Mizzi,