In In Re the Marriage of Elizabeth Anne Wendt and William Nicholas Pullen, the California appellate court, Third District, addressed the intersection of family law and probate and trust law, holding that an award of attorney fees from a spendthrift trust is not contingent on the bad faith of the trustee.
The Facts of In Re the Marriage of Elizabeth Anne Wendt and William Nicholas Pullen
William Wendt (grantor) created the Elizabeth Anne Wendt Trust as an irrevocable spendthrift trust with Windham Bremer as the trustee and his daughter Elizabeth Wendt (Wendt) as the beneficiary. In 1995, Wendt agreed to relinquish her rights to compel distributions to her in exchange for her father paying her money and putting more money in the trust. The trust had extensive assets that include stock and funds from the family business and real property in California.
Wendt married William Nicholas Pullen in 1997, and petitioned to dissolve the marriage in 2013.
In 2015, Wendt requested that the trustee disburse trust funds to meet her support needs. Her request was denied.
Pullen (the soon-to-be ex-husband) filed a motion to join the trust and the trustee to the dissolution action and to compel the trustee to disburse funds to Wendt as necessary to ensure payment of spousal or child support orders and for attorney fees.
The California family court granted the motion to join on February 16, 2016. It also ordered Pullen to pay $73 a month in child support to Wendt. Finding the parties’ net incomes were substantially similar and that Wendt did not have access to the spendthrift trust’s assets, it declined to order any spousal support to Pullen, and denied Pullen’s request for attorney fees from Wendt.
Pullen filed a section 2030 request for $76,141 in attorney fees and costs from the trustee for expenses incurred in bringing the successful motion to join the trust and trustee. The family court denied the request, finding it was precluded from making an award absent a finding of bad faith by the trustee.
Section 2030 – California Family Law Provision On Attorneys Fees
A party’s ability to recover attorney fees and other expenses and costs in a dissolution proceeding is governed by section 2030, which provides in pertinent part:
In a proceeding for dissolution of marriage, nullity of marriage, or legal separation of the parties, and in any proceeding subsequent to entry of a related judgment, the court shall ensure that each party has access to legal representation, including access early in the proceedings, to preserve each party’s rights by ordering, if necessary based on the income and needs assessments, one party, except a governmental entity, to pay to the other party, or to the other party’s attorney, whatever amount is reasonably necessary for attorney’s fees and for the cost of maintaining or defending the proceeding during the pendency of the proceeding.
Parties to the dissolution proceeding other than spouses can be required to pay under this statute. California has a strong public policy in favor of ensuring a level playing field between the parties in a dissolution action.
Can a Spendthrift Trust Be Ordered To Pay Attorney’s Fees In a Dissolution Proceeding?
Yes, even a spendthrift trust can be ordered to pay attorney’s fees in a dissolution proceeding.
A spendthrift trust is created where the settlor gives property in trust for another, and provides that the beneficiary cannot assign or otherwise alienate his or her interest, and that it shall not be subject to the claims of the beneficiary’s creditors.’ [Citations.]” (Chatard v. Oveross (2009) 179 Ca.App.4th 1098, 1104.) “Creditors of the beneficiary generally cannot reach trust assets while those assets are in the hands of the trustee, even if they have secured a judgment against the beneficiary. Rather, creditors must wait until the trustee makes distributions to the beneficiary. The law permits such trusts because donors have ‘the right to choose the object of [their] bounty’ and to protect their gifts from the donees’ creditors. [Citation.] Providing donors some measure of control over their gifts encourages donors to make those gifts, to the benefit of the donor, the beneficiary, and ultimately the beneficiary’s creditors.” (Carmack v. Reynolds (2017) 2 Cal.5th 844, 849.)
Creditors With Claims For Spousal Or Child Support Can Reach Into a Spendthrift Trust
Under the California probate code, spendthrift provisions are generally valid as to both trust income and principal. However, exceptions exist for certain creditors:
Such creditors include those with claims for spousal or child support [citation] and those with restitution judgments [citation]. In addition, a state or local public entity can reach trust assets when the beneficiary owes money for public support [citation] unless distributions from the trust are required to care for a disabled beneficiary [citation].” (Carmack v. Reynolds, supra, 2 Cal.5th at p. 849.)
Is a Bad Faith Finding Required To Award Fees From a Spendthrift Trust?
In denying Pullen’s request for attorney’s fees, the California family court relied on a spendthrift trust case, Ventura County Dept. of Child Support Services v. Brown (2004) 117 Cal.App.4th 144 (Ventura), to find section 2030 fees could be awarded only upon a finding of bad faith by the trustee.
The California appellate court disagreed, holding that a bad faith finding is not necessary to compel the payment of support from a spendthrift trust, stating:
Contrary to the family court’s ruling here and the arguments of respondent in this case, Ventura does not require a finding of trustee bad faith to compel payment of child support from a spendthrift trust. Rather, the act of declining to pay child support owed by the beneficiary was the requisite “improper motive” that justified court ordered disbursement of child support payments. “Under [Probate Code] section 15305, even if the trust instrument contains a spendthrift clause applicable to claims for child support, ‘it is against public policy to give effect to the provision.’ [Citation.]” (Id. at p. 154.)
Although the attorney fees sought here were in support of litigation for potential child support payments from the spendthrift trust, any potential tension between section 2030 and Probate Code section 15305 is irrelevant to the resolution of this case because the dispute is about subject matter not covered by the spendthrift provisions of Probate Code section 15305. Ventura is nonetheless instructive as it shows it is possible that the trustee of a spendthrift trust can be compelled to disburse assets in light of countervailing public policies.
Such a right to attorney’s fees is not conditioned on bad faith conduct. A spendthrift provision like the one at issue may not apply to claims for child support because California Probate Code section 15305 specifically precludes a beneficiary’s efforts to avoid support obligations.