“Oh what a tangled web we weave when we first practice to deceive.” This quote from Sir Walter Scott was the first line in the opinion of a Florida appellate court finding that a former husband’s legal maneuvering under the trust code was insufficient to protect the trust distributions he received from being paid toward his alimony support obligations owed to his former wife.
After thirty years of marriage, Bruce Berlinger divorced his wife in 2007 and entered into a marital settlement agreement agreeing to pay her $16,000 per month in permanent alimony. Thereafter, Berlinger and his current wife enjoyed a substantial lifestyle funded through payments Berlinger received directly from the Berlinger family discretionary trusts that had been established by his family. The trusts paid for all of his living expenses, including mortgage payments, property taxes, insurance, utilities, food, and travel. Although Berlinger continued to live off the trusts, he voluntarily stopped paying alimony in May 2011.
When Berlinger stopped paying alimony, his ex-wife filed a motion to enforce the marital settlement agreement and for contempt of court. Just prior to the hearing on the ex-wife’s motions, Berlinger conveyed his real property into a never-before-disclosed irrevocable life insurance trust, and assigned his attorney as the trustee. Berlinger never amended his financial disclosures, however, and continued to live off the trusts.
As a result of Berlinger’s failure to pay, the ex-wife was awarded a continuing writ of garnishment against Sun Trust, the bank that held the Berlinger family trusts’ assets. The writ of garnishment required Sun Trust to make the discretionary trust payments typically paid to Berlinger to instead be paid to the ex-wife until the past due amount was paid in full, and to ensure sufficient funds for future payments. Berlinger appealed the court’s ruling, arguing that the Berlinger family trusts were spendthrift and discretionary trusts, which meant they were not subject to the claims of creditors.
The appellate court agreed with the trial court’s decision awarding a continuing writ of garnishment for several reasons. First, the court found that the Berlinger family trusts contained discretionary and spendthrift provisions, which generally means the trust’s funds are not available to be paid to creditors. However, the court found that claims for child support and spousal support can, in certain circumstances, constitute exceptions to the general rule. Second, the court found that the ex-wife already had a court order against Berlinger for support; therefore, the spendthrift provisions included in the Berlinger family trusts were unenforceable as to the ex-wife. Third, the court found that Florida public policy strongly favors enforcement of child support and alimony support orders, and to hold otherwise, would defeat this public policy.
In conclusion, while discretionary and spendthrift trusts are generally effective against creditor claims, when it comes to family obligations such as child support or alimony, you better pay or the courts will not hesitate to ignore these protections and force payments from the trust.
