Massachusetts’ Supreme Judicial Court just released opinion impacts many estate planning clients.
Often, one strong recurring desire of estate planning clients is to protect their children’s inheritance from a child’s subsequent divorce. Ongoing “Inheritance Trusts” (also known as discretionary trusts) have been a solution to meet this goal.
Yet, until today, this important tool in the Massachusetts estate planning attorney’s toolbox was called into question. In the Massachusetts’ divorce case of Pfannenstiehl v. Pfannenstiehl, the trial court included a portion of a discretionary trust created by the husband’s parents and of which the husband was one of several beneficiaries, as a marital asset. On appeal, the appellate court agreed with the lower court. This ruling sent a shockwave through the Massachusetts estate planning world. Could a parent’s wish to “divorce-proof” a child’s inheritance no longer be met in Massachusetts?
Fortunately, the husband appealed to the state’s highest court, the Supreme Judicial Court, which heard the case this past spring. Today, the court released its opinion reversing the lower courts’ rulings. This is welcome news for many in the estate planning bar and a victory for those parents wanting to protect their children’s inheritances.
Had the court not ruled as it did, the implications would have gone beyond inheritance trusts, as it would have also impacted any trusts that large gifts were made to while a client was alive, as well as so-called Medicaid Trusts. Now clients can rest easier knowing that properly drafted trusts will continue to afford their loved ones a greater level of protection from divorce.