Reid and Riege Wins Trust “Decanting” Case in the Connecticut Supreme Court

In a significant victory for Reid and Riege’s clients, the Connecticut Supreme Court upheld the authority of trustees to “decant,” or distribute assets from, an irrevocable trust and transfer them into a different trust, thereby protecting those assets from the reach of the trust beneficiary’s divorcing spouse. The case, Michael J. Ferri, et al. v. Nancy Powell-Ferri, et al., has been followed nationally by trust and divorce lawyers as well as wealth management professionals.

Reid and Riege represented the successor trustees of a 1983 Massachusetts trust created for the sole benefit of the grantor’s son. The 1983 trust had given the beneficiary a right to withdraw certain trust assets when he reached certain ages. The 1983 trust had also given the trustees the right to “pay to or segregate irrevocably” trust assets at any time during the beneficiary’s life.

The beneficiary’s spouse sued for divorce in Connecticut, raising the possibility that she would claim an interest in trust assets that her husband could obtain on written demand because he had reached the age requirement under the trust. After engaging Reid and Riege, the trustees created a new trust and distributed substantially all of the assets from the 1983 trust into a new trust which did not give the beneficiary a right of withdrawal, effectively placing the trust assets out of the reach of the divorcing spouse. Thereafter, the trustees commenced a lawsuit in Connecticut Superior Court seeking a declaration that the trustees had the authority to decant.

On behalf of the trustees, Reid and Riege appealed a decision of the trial court ruling that the trustees did not have authority to decant and awarding the divorcing spouse attorneys’ fees. Breaking new ground, Reid and Riege persuaded the Connecticut Supreme Court to certify the authority question to the Massachusetts Supreme Judicial Court. After the Massachusetts court ruled in the trustees’ favor, the Connecticut Supreme Court reversed the trial court’s decision and determined that, under Massachusetts law, the trustees had authority to decant. The Connecticut Supreme Court also held that, under Connecticut law, the new trust was not “self-settled” by the beneficiary. Reid and Riege also secured a reversal of the trial court’s award of several hundred thousand dollars in attorneys’ fees to the divorcing spouse.

The Reid and Riege team was led by litigator Dominic Fulco, III, and estate planning attorney John R. Ivimey.

About Reid and Riege, P.C.

Founded in 1950, Reid and Riege, P.C., is a full service law firm providing legal counsel and representation to many of the region’s leading business and nonprofit organizations, financial institutions, corporations and individuals. The firm’s focus includes the following practice areas: commercial finance; corporations, limited liability companies and other business organizations; business succession planning; executive agreements and compensation; mergers and acquisitions; pension and other employee benefits; employment and personnel; environmental; health care; estate planning and estate settlement; executive and physician planning; fiduciary and probate litigation; fiduciary services; general litigation; insolvency and bankruptcy; multiemployer benefit plans; nonprofit organizations; real estate; and tax. Reid and Riege has principal offices in Hartford and New Haven. For additional information, please visit www.rrlawpc.com.