Imagine that you set up a trust for your son and give an independent trustee the discretion to make distributions to your son for his health, education, maintenance and support. Next, imagine that your son gets divorced, loses his job, and is unable to pay his alimony. Can your son’s ex-wife access the trust to satisfy the unpaid alimony. In Tennessee and some other states, the answer is a resounding “No.” These states zealously protect a person’s right to determine the beneficiaries of the person’s largesse. Other states have determined that the public policy of making sure that alimony is paid is a higher priority.
Florida is one of the states that places more importance on satisfying alimony claims. In the recent case of Berlinger v. Casselberry, the Court prohibited the trustee from making distributions to the primary beneficiary of the trust unless and until the beneficiary was current on his alimony obligations. The Judge’s Order effectively meant that the alimony had to be paid first, and thus, the beneficiary’s ex-wife became the primary beneficiary of the trust. The reason that the ex-wife sought the Court’s help is because her ex-husband was not working and was receiving no income that she could attach to satisfy her alimony. Her ex-husband’s trust was directly paying all of his living expenses. This technique of paying a beneficiary’s expenses out of the trust is specifically authorized by a recent Tennessee statute, but it was not allowed in the Florida case.
The Berlinger case highlights the significance of choosing the state law that will govern the trusts that you establish. Tennessee passed substantial changes to its trust laws in 2013 to strengthen the rights of a grantor to choose who will benefit from the trust. If you believe you can do a better job of picking your beneficiaries than a judge, you should make Tennessee law the governing law for your trusts.