Alimony & Spousal Support


In the family law and estate litigation case of In Re Irrevocable Trust Agreement of Klein, PICS Case No. 16-0355 (C.P. Monroe, Jan 7, 2016) the Honorable David J. Williamson ruled that under the plain language of the Irrevocable Trust which contained no requirement that the parties’ remain married, decedent’s former spouse was a co-trustee and beneficiary of irrevocable trust. Ex-spouse had a standing to file objections to co-trustee’s accounting.

This matter came before the court on the objections of Ann Klein to the account filed by RBC Trust Co., the co-trustee of the Irrevocable Trust Agreement of Lawrence B. Klein. At issue was whether if Ann was a co-trustee and beneficiary of trust in order to assert standing. In 1992, Ann and Lawrence husband and wife purchased a $2.5 million life insurance policy on Lawrence as part of their estate planning. Ann was the owner and beneficiary of the policy.

In 1994, they created the Ann Klein Revocable Trust Agreement, the Irrevocable Trust of Lawrence Klein and a split-dollar agreement regarding the life insurance policy. The revocable trust became the policy owner, and irrevocable trust which benefited Ann and the parties’ two children, became the beneficiary. The split-dollar agreement required Ann as trustee of the revocable policy, to change the beneficiary of the policy from herself to the irrevocable trust and to pay all premiums of the policy. Lawrence was the original donor.

Ann and Lawrence divorced in 2008.  The cash value of the policy was $301,282 at that time. Ann was awarded the revocable trust, and hence it is cash value, in the divorce she thereafter paid more than $100,00 in policy premiums until Lawrence’s death in 2012.

The court found the irrevocable trust, the revocable trust and the split-dollar agreement set forth the parties’ intention at the time of their bargain- estate planning for Ann and the children-and that the irrevocable trust referred to Ann as “donor’s spouse.” The trustee of the irrevocable trust had the sole authority to change or amend the policy beneficiary.

The divorce and marital property award were silent as the policy. The parties’ had no other written agreements regarding it. The court found that it was bound by the wording of the irrevocable trust to determine Lawrence’s intent. The court found that 20 Pa. C.S.A. 2507(2), “modification of circumstances,” was inapplicable, because it did not apply to the irrevocable trusts. Further, it found resort to rules of construction unnecessary.

When the identifying parties, the irrevocable trust stated that “donor is presently married to Ann M. Klein (hereinafter ’donor’s spouse.”)  The court said that was a simple way of indentifying the parties’ without need to use names. No language in the irrevocable trust addressed divorce or the parties’ need to be married. The court said absent any other language indicating that the terms of  the  trust only applied if Ann and Lawrence were married, the plain meaning of the trust language was to apply to Ann without expectation. The court said it was guided by the parties’ clear intention.

Lawrence wanted the policy for the benefit of Ann and the children. Ann continued to pay the premiums after the divorce. The court said that showed the parties’ intended to continue the policy and for Ann to pay for it.

Lawrence could have bargained for language relating to divorce at the time of he executed the irrevocable trust, but did not. Also the policy was an asset that could have been addressed in the marital property award. Lawrence opted not to seek judicial intervention in the divorce proceedings as to cash value. The court said that confirmed the irrevocable trust’s clear language. It added that it was only fair that Ann receive the benefits conferred on her in the irrevocable trust as she continued to pay the premiums after the divorce. The court concluded that Ann was beneficiary and co-trustee of the irrevocable policy.

Reference: Digest of Recent Opinions, Pennsylvania Law Weekly 39 PLW 306 (March 29, 2016)

Filed Under: Irrevocable Trusts; Beneficiaries; Modification by Circumstances

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