Metropolitan News-Enterprise

 

Tuesday, March 30, 2004

 

Page 1

 

Appeals Court Rules Spendthrift Trust Must Pay Child Support

 

By DAVID WATSON, Staff Writer

 

A trustee of a spendthrift trust may not refuse to disburse funds to a beneficiary in order to avoid satisfying the beneficiary’s child support obligations, this district’s Court of Appeal ruled yesterday.

Div. Six upheld an order issued by Ventura Superior Court Judge Glen M. Reiser requiring trustee Jeffrey C. Brown to disburse funds from the Helen W. Marinos Life Insurance Trust to pay back and current child support owed by Marinos’ son, Kenneth Marinos. Justice Paul Coffee noted that the decision was the first to interpret Probate Code Sec. 15305, which makes the assets of spendthrift trusts reachable for child support obligations.

Reiser ordered payments of over $146,000 to be made to the Ventura County Department of Child Support Services and to the mother of two of Kennth Marinos seven children. He also ordered ongoing support payments of more than $1,200 monthly.

Coffee rejected Brown’s contention that the funds were reachable under Sec. 15305 only to the extent the trustee exercised his discretion to make disbursements.

‘Trustee’s Discretion’

The section, which applies specifically to spendthrift trusts, provides that a court may order a support judgment satisfied out of “all or part of future payments that the trustee, pursuant to the exercise of the trustee’s discretion, determines to make to or for the benefit of the beneficiary.”

Coffee noted that the provision, recommended by a law revision commission in 1986, was based on a Wisconsin statute. In the only Wisconsin decision construing the law, he conceded, an appellate jurist stated that it did not authorize a trial court to “relieve trustees of their discretion over when a trust shall make payments to or on behalf of a beneficiary, or to substitute its own discretion for that of the trustees.”

But he pointed out that the Wisconsin case involved a wife who had not established that she was a judgment creditor.

“We acknowledge that existing law gives a trustee the discretion to determine whether payments are made and in what amount,” Coffee wrote. “However, in exercising its discretion to make or withhold payments, a trustee may not act in bad faith or with an improper motive.”

Assets Over $500,000

Coffee cited language in the trust indicating that Helen Marinos intended that the trust assets—of which Brown estimated Kenneth Marinos’ share to be over half a million dollars—should go to benefit the spouses or children of her two sons after their deaths.

“Although neither son is deceased, the Trust instrument reflects Helen Marinos’ intent to provide support to her grandchildren,” the justice observed. Brown, Coffee said, had “refused to make any payments from the Trust for the express purpose of avoiding Marinos’ child support obligation.”

He explained:

“In light of the statutory and public policy objectives in favor of the payment of support, we conclude appellant has exercised his discretion in bad faith and with an improper motive. To deny the trial court authority to compel the exercise of a trustee’s discretion in this instance creates the very problem that the statute was enacted to remedy—avoiding the payment of child support. The statute cannot have been intended to allow a beneficiary to defraud support creditors by hiding behind the trustee’s discretion. This is directly contrary to the legislative purpose behind section 15305.”

Related Provision

The justice said the court’s conclusion was not undermined by the fact that Sec. 15306, which deals with invading a spendthrift trust to recover funds expended on public support for the beneficiary, specifically provides that if the beneficiary is the settlor or the settlor’s spouse or minor child, the court may order reimbursement “without regard to whether the trustee has then exercised or may thereafter exercise the discretion in favor of the beneficiary.”

Brown argued that the absence of a similar provision in Sec. 15305 justifies an inference the Legislature intended that under that section only funds that the trustee elects to disburse should be reachable.

But Coffee reasoned that lawmakers probably included that language only in Sec. 15306 because that section involved situations in which the beneficiary is in a position to influence the trustee.

“It was not within their contemplation that the trustee, faced with an enforceable child support judgment, might act improperly and refuse to satisfy the support judgment altogether,” Coffee declared.

The case is Ventura County Department of Child Support Services v. Brown, B168108.

 

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