MICHAEL J. FERRI, TRUSTEE, et al. v. NANCY POWELL-FERRI et al., SC 19432/19433;

NANCY POWELL-FERRI v. PAUL JOHN FERRI, JR., SC 19434

Judicial District of Hartford

 

     Trusts; Dissolution of Marriage; Whether Trustees had Authority to Decant Assets from one Trust to Another; Whether Husband Violated Automatic Orders by Taking no Action to Restore Decanted Assets to Marital Estate.  Paul John Ferri, Jr. (Ferri), is the sole beneficiary of a trust established by the settlor, Ferri’s father, in 1983.  The trust’s terms provide that it is governed by Massachusetts law.  In 2011, during the pendency of Ferri’s divorce from Nancy Powell-Ferri (Powell-Ferri), the trustees decanted a substantial portion of the trust assets to another trust.  “Decanting” is the distribution of trust property to another trust pursuant to a trustee’s discretionary authority to make distributions to, or for the benefit of, a trust beneficiary.  While the terms of the 1983 trust gave Ferri the right to withdraw principal in increasing percentages based on his age, he does not have that right under the 2011 trust.  The trustees brought a declaratory judgment action seeking determinations that they validly exercised their authority in transferring trust assets and that Powell-Ferri has no interest in the 2011 trust.  Powell-Ferri counterclaimed, seeking a declaration that the transfer was invalid and ineffective to shield the assets from her in the divorce proceeding.  The trial court rendered judgment for Powell-Ferri, finding that the trustees lacked authority to decant assets from one trust to another.  The court ordered that 75 percent of the decanted assets be restored to the 1983 trust, reasoning that, at the time of the decanting, the 1983 trust gave Ferri unfettered access to 75 percent of its value.  The court subsequently rendered judgment in the divorce action, dissolving Ferri and Powell-Ferri’s marriage.  Ferri and the trustees appeal the judgment in the declaratory judgment action, challenging the determination that the trustees lacked authority to decant assets from the 1983 trust to the 2011 trust.  They contend that, under Massachusetts law, a trustee’s authority to decant stems from the terms of the trust document itself and that, here, the language of the 1983 trust demonstrates the settlor’s intent to empower the trustees to decant assets from the trust.  They also claim that the trial court improperly struck an affidavit of the settlor of the 1983 trust offered as evidence of the settlor’s intent and that Powell-Ferri lacked standing to assert her counterclaims against the trustees because only a trust beneficiary can sue a trustee alleging misconduct in the administration of a trust.  Powell-Ferri cross appeals, claiming the court improperly ordered that only 75 percent of the assets be restored to the 1983 trust, improperly refused to remove Michael Ferri as a trustee and improperly refused to order the trustees to provide an accounting of the fair market value of the 2011 trust.  Powell-Ferri also appeals the divorce judgment, claiming that the court should have found Ferri in contempt for dissipating marital assets in violation of the Practice Book § 25-5 automatic orders by failing to take any action seeking return of the decanted assets to the marital estate.  Powell-Ferri also claims that the trial court erred in finding that she did not contribute to the 1983 trust and in failing to find that 100 percent of the trust assets are marital property subject to distribution in the divorce.  Finally, she argues that the trial court’s order that Ferri pay her attorney’s fees in the divorce wrongly was structured in such a way that Ferri can avoid that obligation.