Can a divorcing spouse be imputed income from a beneficial interest in a discretionary support trust?
In the landmark case of Tannen v. Tannen, 416 N.J. Super. 248 (App. Div. 2010), the Appellate Division conclusively determined (as upheld by the Supreme Court, see 208 N.J. 409 (2011)) that a divorcing spouse could not be imputed income based upon their interest in a discretionary trust for the purpose of calculating support obligations. While a trial court may fairly impute income to a spouse who is voluntarily unemployed or underemployed, or based upon underperforming investments (resulting from the spouse’s poor decision making), where a spouse has no ability to control or compel payment from an asset (as in the case of a discretionary trust), the court may not impute income from that asset to the spouse for support purposes.
However, those holding beneficial interests in discretionary trusts are not completely off the proverbial hook. A court may still consider any historical record of payments from a discretionary trust during a beneficiary’s marriage in order to assess that beneficiary’s “actual need” for support from their spouse post-divorce.