In Re the Marriage of Guinn
2004 WL 352083, 93 P.3d 568, 2004 Colo. App. LEXIS 209 (2004)
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Rule of Law:
A spouse's mandatory right to receive future income from an irrevocable trust does not constitute 'property' subject to division in a marital dissolution where the spouse has no ownership interest in the trust corpus and no control over the trustees' investment decisions.
Facts:
- Cheryl A. Guinn and David L. Guinn married in 1987.
- In 1990, David's parents created an irrevocable generation-skipping trust and funded it with stock and cash.
- The terms of the trust require the trustees to distribute the net income to David for his lifetime, in at least annual installments.
- The trustees, David's parents, have sole discretion to determine investment strategy and to allocate receipts between principal and income.
- The trustees' stated investment philosophy was to maximize the growth of the trust's principal, not to generate income for David.
- David has no ownership interest in the trust's corpus, no power of appointment, and no right to direct the trust's disposition; his children are the remaindermen.
- The marriage was dissolved in 2002.
Procedural Posture:
- Cheryl A. Guinn and David L. Guinn initiated a dissolution of marriage proceeding in a Colorado trial court.
- The trial court entered permanent orders which included a determination that David's income interest in an irrevocable trust was not a property interest subject to division.
- Cheryl A. Guinn, the wife, appealed the trial court's property division to the Colorado Court of Appeals.
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Issue:
Does a spouse's mandatory right to receive future income distributions from an irrevocable trust, where the trustees have sole discretion over investment strategy and the spouse has no interest in the trust corpus, constitute 'property' subject to division in a marital dissolution proceeding?
Opinions:
Majority - Judge Graham
No. A spouse's mandatory right to receive future income from a trust in which he holds no ownership interest in the corpus is a mere expectancy, not a property interest subject to division upon marital dissolution. The court reasoned that property is defined as something that has an exchangeable value. Here, David's interest in future, undeclared income has no present exchangeable value because he has no ownership of or control over the underlying corpus. The trustees alone decide how to invest and whether to allocate receipts to income or principal, meaning the amount of income, if any, is uncertain and not within David's control. Unlike a vested remainder interest, which is a fixed right to future enjoyment, this income stream derives from property vested in third parties (the remaindermen). Because David has no ability to reach the corpus or control the investments, the court concluded the future income is a 'mere gratuity' or expectancy arising from the 'largess of the settlors' and not divisible property under § 14-10-113.
Analysis:
This decision clarifies the definition of 'property' in marital dissolution cases involving trusts. It establishes a critical distinction between an interest in the trust corpus (which is property) and a right to receive income generated by a corpus owned by others (which is not). The court's focus on whether the interest has an 'exchangeable value' and whether the beneficiary controls the underlying asset provides a framework for future cases. This ruling narrows the scope of divisible marital assets, protecting income streams from third-party trusts where the beneficiary spouse is passive and lacks control over the principal.
