The Dissipation of Marital Assets into Trusts: A Florida Case Study

What happens when one spouse transfers millions of dollars’ worth of marital assets into a trust before a marital dissolution action is commenced? Are those assets properly considered to have been a dissipation of the marital estate? If so, how does the court make such a determination?

In a case spanning the last decade, the Florida court system made exactly those determinations.

Stephen and Karen Collier were married for 33 years. It was a tumultuous union which included Stephen’s arrests for possession of narcotics, illegally taken from the veterinarian practice he successfully operated with Karen, and subsequent stints in rehabilitation. Stephen’s affair with a woman who, together with her boyfriend, extorted thousands of dollars from Stephen was repeated for a second time with Stephen also sharing his illegally procured veterinarian narcotics with his bad conduct extended to another turn in jail, this time for domestic battery against Karen.

Karen, in turn, took control of the parties’ finances, including those of their veterinary practice. As the fiduciary over their accounts, Karen also issued paychecks to Stephen, which she then illegally forged with his signature stamp and deposited into bank accounts without his knowledge. Karen utilized Stephen’s signature stamp for other withdrawals as well, including a $50,000 donation to her church. In 2011, Karen transferred more than four million dollars in marital assets into a revocable trust, the Duesenberg Trust, in her maiden name. She then filed for divorce in the following year, 2012 and, thereafter, moved the assets of the Duesenberg Trust, together with additional marital assets, to the newly formed irrevocable trust, the Duesenberg Charitable Remainder Trust. Karen was named the sole beneficiary of both the revocable and irrevocable trusts, with no provision made for Stephen. Karen’s certified public accountant was named as trustee, and the terms of the irrevocable trust provided for payments to Karen of 5% of the value annually, with the remainder going to a charitable foundation upon her death.

Thus sparked the chain of events that led to this decision, ten years after the initial divorce filing and creation of the irrevocable trust.

It was determined that, by transferring marital assets to an irrevocable trust, Karen had effectively turned those assets over to a third party, removing them from the reach of both herself and Stephen. Thus, the first question for the trial court to answer was whether such funds were properly characterized as marital and whether their transfer to the irrevocable trust should be considered a distribution to her. The trial court answered both questions in the affirmative, ruling that Karen’s conduct was an intentional dissipation of marital assets, which had occurred within the Florida statutory time limit of two years prior to the filing of the divorce petition. In coming to its conclusion, the trial court ordered Karen to make an equalizing payment to Stephen of $1.92 million.

Both Stephen and Karen appealed the trial court’s ruling, for different reasons, with Karen questioning the trial court’s assessment of the facts surrounding her transfer of the funds and the court’s determination of her resulting intent. Karen argued that she and Stephen lived well below their means, would never be able to spend all of their money, and wanted to leave something to survive them, effectively denying that her transfer was for the purpose of concealing assets in anticipation of divorce. The appellate court, in reviewing what it characterized as a “voluminous record,” made the following statement, “Candidly, it is hard to see how one reasonably could conclude that the former wife’s [Karen] transfer of millions of dollars of assets into a trust beyond the reach of both parties in the middle of a divorce proceeding – with the former wife [Karen] as the only beneficiary while she is alive – was done for any marital purpose.”

The appellate court ended its ruling with that statement, closing with an observation as to the vast resources and time expended in the decade taken to reach its final conclusion. The decision was unanimous, with one judge concurring in result only, stating, “Nothing about this aged appeal…warrants more than a per curiam affirmance…[as] excessive judicial resources had been expended on this needlessly contentious marital dissolution case.”

One wonders how, exactly, Karen will access the $1.92 million she has been ordered to pay to Stephen, and what Stephen’s recourse will be if payment is not forthcoming. Until next time!