How are Inheritances Handled in a Massachusetts Divorce?
By Haskell A. Kassler and Joyce G. Perocchi
Prior to the recent case of Davidson v. Davidson, there was little or no consistency in the manner in which courts dealt with efforts to depose or involve the parents of one of the spouses in an ongoing divorce action. Some courts allowed such discovery to take place, on the theory that G.L. c. 208, § 34, mandates that the court consider the estate of the parties and the opportunity of each party to the future acquisition of capital assets and income. Other courts felt that it was overly burdensome to require parents of the parties to produce information with regard to their finances, on the theory that such discovery would constitute an invasion of privacy and because future expectancies are highly speculative in nature.
With Davidson the Appeals Court has shed some light on the question.
In Davidson, the court dealt with the treatment and relevance of inheritances and expectancies in actions brought pursuant to G.L. c. 208, § 34. In that case, the husband possessed an expectancy under his mother’s will, as well as a remainder interest in an irrevocable trust established by his deceased father.
The beneficiary of the testamentary trust was the husband’s mother, and the trustees had unlimited discretion to invade principal to satisfy the mother’s needs. The decision, written by Judge Warner with surgical precision, articulates the concept that marriage is analogous to a business partnership. As a result, G.L. c. 208, § 34, contemplates the division of assets at the time of the dissolution of the partnership.
With this concept as its foundation, the court determined that the irrevocable remainder interest, “while it may have been at the outer limits,” represented an item of the divisible marital estate. The expectancy under the mother’s will, however, was found not to be marital property subject to division. The court did note, however, that unlike the laws in some states, the Massachusetts equitable distribution statute does not specifically exclude inheritances or expectancies.
While our statute is intended to cover “all or any part of the estate of the other,” no extraordinary circumstances were presented in Davidson to allow the expectancy to be considered as part of the marital estate pursuant to G.L. c. 208, § 34.
While Davidson provides judicial guidelines for a heretofore troublesome question, the case does not necessarily dispose of all the related issues. First, the court states that while the bare expectancy presented in Davidson was not divisible as a marital asset, an expectancy may be considered as a divisible asset in “extraordinary circumstances.” Facts that would constitute “extraordinary circumstances” are not described, nor does the court indicate whether the phrase relates to a particular situation or, rather, to specifics relating to the settler/testator. As a result, practitioners should scrutinize their cases to determine if an argument can be made for the existence of an “extraordinary circumstance.”
Several other difficult situations are identified in Davidson, but reserved for full treatment at a later time. One such situation is where the parties separate, live independent lives for a number of years and finally, after the passage of a length of time, decide to “formalize” the dissolution of their marriage. During the lengthy period of separation, one party’s parents both die, leaving that party substantial inheritances. In another situation, a complaint is filed and during the pendency of the litigation the husband’s closely held corporation is sold for a sum far in excess of the value at the time of separation and for more than either party had ever anticipated.
The proper date of valuation is critical. Valuation difficulties arise not only in dramatic situations such as those posed above, but also in the “garden variety” of cases that may involve a marital home or a pension plan. The court indicates that it is unlikely to adopt a hard and fast rule on valuation applicable to all cases. Although the property subject to division is generally valued as of the date of the order of division, the court states, “we think the development of law in this respect is best left to a case-by-case analysis.”
The Appeals Court also reminds us that when a trial court is making its findings under section 34, the court must consider “the opportunity of each for the future acquisition of capital assets and income,” and therefore the statute mandates a look into the future.
Although a future expectancy or inheritance may not be considered part of the present marital estate so as to render it subject to division as a marital asset, it may be considered by the trial court “in determining what disposition to make of the property which is subject to division.
Potential inheritances remain significant and relevant issues for the trial justice. As such, they are entitled to be explored through reasonable pretrial discovery.
Davidson does not suggest that it is “open season” on each and every relative and friend of a litigant. However, Davidson clarifies the existing law by acknowledging that the portion of section 34 dealing with the opportunity of future acquisition of capital assets or income must involve consideration of expectancies and inheritances. The court also notes that:
[in] any event, the expectancy might be considered by the judge, having been mindful of the evidentiary constraints which should deflect secondary considerations, under the Section 34 criterion of opportunity of each for future acquisition of capital assets and income in determining what disposition to make of property which is subject to division.
Such a statement reaffirms the Supreme Judicial Court’s ruling in Rice v. Rice, wherein the likelihood of a substantial family inheritance was said to be a proper matter for the trial court to consider in dividing the marital property. See alsoBelsky v. Belsky (prospect of an inheritance rendered evidence admissible).
In discussing the difference between evidence affecting the division of the marital estate as opposed to the actual marital estate, the court cites approvingly the Illinois case of In re Marriage of Smith, which stands for the proposition that, even where the governing statute excludes inheritances from the definition of marital property, it is proper for the court to consider an inheritance as a factor bearing on division of property.
The Illinois statute mandates a consideration of “relevant economic circumstances of each spouse,” as well as “the reasonable opportunity of each spouse for future acquisition of capital assets and income.” Even though inheritances are not divisible marital assets, the court found that it was appropriate for the trial court to consider the future inheritance when entering its alimony order.
In the Indiana case of Lord v. Lord, the court notes that the Indiana statute preserves the “one pot” theory and specifically prohibits exclusion of any assets from the scope of the trial court’s power to divide and award. As in Smith,the issue before the court was whether the trial judge was required to exclude evidence relating to the wife’s expectancy. The court noted that “such evidence is admissible and relevant in certain situations as an economic circumstance of the spouse.” Although admitted, the trial justice gave the evidence no weight because he determined it to be too speculative. The trial justice’s findings are most instructive on this matter:
The court now finds that the evidence was properly admitted during the trial and the objection goes to the weight to be given to the evidence rather than its admissibility. There was no evidence as to the health of petitioner’s mother nor evidence from which the court could reasonably infer her life expectancy. There was no evidence that she had made a will, the evidence was to the contrary. The evidence considered as a whole seems too speculative and remote to be of any value for consideration in the division of assets of the parties, and the court has not given any consideration to that evidence in making a division of the property. Such an expectancy in this case is not clearly within Ind. Code 31-1-11.5-11(b) and is so uncertain an occurrence that the court finds that it should not be afforded the weight in the disposition of the assets of the parties. The petitioner could predecease her mother, the mother could draft a will leaving all of her property to another, the government authorities might change the laws of inheritance or taxation so as to make the expectancy of considerably different value, et cetera. However the court is of the opinion that evidence of such an expectancy was properly admitted under Ind. Code 31-1-11.5-11(b)(3) as an economic circumstance of the spouse. It is not too difficult to conceive of a situation where the property does not fall within the code provisions as property to be divided but nevertheless should be given some consideration by the court. [Emphasis supplied.]
While we must recognize that unlimited pretrial discovery of relatives can be used to harass as well as to obtain legitimate information, two principles must be kept in mind. First, Mass. R. Civ. P. 26(b) provides that the scope of discovery is broad. In interpreting Rule 26, Massachusetts courts have adopted the definition of “relevancy” established by the United States Supreme Court in connection with Fed. R. Civ. P. 26(b)(1):
The United States Supreme Court has defined relevancy under Fed. R. Civ. P. 26(b)(1), the parallel rule to Mass. R. Civ. P. 26(b)(1), 365 Mass. 772 (1974), “broadly to encompass any matter that bears on, or that reasonably could lead to other matter that could bear on, any issue that is or may be in the case, see Hickman v. Taylor, 329 U.S. 495, 501, 67 S. Ct. 385, 388, 91 L. Ed. 451 (1947). Consistently with the notice-pleading system established by the Rules, discovery is not limited to issues raised by the pleadings, for discovery itself is designed to help define and clarify the issues. Id. At 500-501, 67 S. Ct. at 388. Nor is discovery limited to the merits of a case, for a variety of fact-oriented issues may arise during litigation that are not related to the merits,” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351, 98 S. Ct. 2380, 2389, 57 L. Ed. 2d 253 (1978). “[A]bsent compelling reasons to the contrary,” Rollins Envtl. Servs., Inc. 368 Mass. 174, 179-180 (1975).
Second, discovery is not foreclosed because the party with the burden of responding to discovery suffers detriment. Hearst Corp. v. A. Walk, Inc. (court allowed discovery though defendants showed that their business would suffer if the discovery requested were allowed).
Davidson does suggest that a standard of reasonableness must be maintained. If the evidence is admissible and the trial justice must then decide what weight to accord it, it is clear that limitations do exist with regard to the persons who may be deposed and to the extent of the examination. A third cousin with whom there is no showing of a relationship is clearly not a person who should be deposed.
A parent or grandparent with whom a party has been very close is on a different footing. The age and medical status of that person, as well as details of the estate plan, are relevant. Furthermore, the net worth of the deponent (rather than his or her current income) is the proper subject of inquiry.
In conclusion, there is clearly a difference between property subject to present division and the expectancy of the future acquisition of assets, which should affect the current division. Nevertheless, because an item is considered too uncertain to be divided as part of marital property does not mean that it should not be part of the court’s deliberations of how the marital property will be allocated.
Furthermore, there is a distinction between the relevance of evidence and the weight to be accorded it. G.L. c. 208, § 34, requires that the court consider the future, as well as the past and present. To deny that inheritances are an essential element of a party’s future contradicts the letter and spirit of the statute and the true meaning of the phrase “equitable distribution.”
 19 Mass. App. Ct. 364 (Feb. 20, 1985).
 Id. At 370.
 Id. At 374.
 Id. At 374-375.
 Id. At 370.
 372 Mass. 398 (1977).
 9 Mass. App. Ct. 852 (1980).
 100 Ill. App. 3d 1126 (1981).
 Ill. Rev. Stat. 1979, c. 40, ¶ 503.
 443 N.E.2d 847 (Ind. App. 1982).
 Supra. N. 8, at 1130-1131.
 Lord v. Lord, II. 443 N.E.2d 847 (Ind. App. 1982).
 Id. At 852.
 Cronin v. Strayer, 392 Mass. 526, 467 N.E.2d 143, 149 (1984).
 12 Mass. App. Ct. 951, 426 N.E.2d 1167, 1168 (1981).
The article “Davidson v. Davidson – A Careful Guide Through the Thicket of Future Inheritances and Expectancies Under G.L. c. 208, § 34” appeared in Volume 3, No. 1 (Spring, 1985) of The Massachusetts Family Law Journal.
Factors to be Considered in Dividing Marital Assets Under G.L. c. 208, §34
- Length of marriage.
- Conduct of the parties during the marriage.
- Age of the parties.
- Health of the parties.
- Station of the parties.
- Occupation of the parties.
- Amounts and sources of income.
- Vocational skills.
- Estate (assets) of the parties.
- Liabilities of each of the parties.
- Needs of each party.
- Opportunity of each party for future acquisition of capital assets.
- Opportunity of each party for future acquisition of income.
- Contribution of each party in the acquisition, preservation or appreciation in value of their respective estates.
- Contribution of each party as homemaker.
- Needs of the children.