A contentious property division dispute involving trusts and limited liability companies that own variety of assets shows how family law can overlap with trust law, corporate law and tax law. The influence of individual state laws regarding trusts, property division. In general, Connecticut law does not make distinctions between marital property and separate property during the dissolution of marriage. However, the litigants often raise complex issues regarding whether a party has control over an asset, or as importantly, whether a party has a legally recognized property interest in an asset that is held in trust.
A recent Wall Street Journal article discussed a divorce dispute between Marie Bosarge and her billionaire husband, Wilbur Edwin “Ed” Bosarge. The couple were married in 1989. Nine years later the husband founded a high-frequency trading firm that is now recognized as one of the premiere companies of its kind.
Assets Purchased Through Trusts
The couple purchased a wide range of assets, including more than a dozen homes, several yachts, as well as other items including antiques and art. Many of the assets were purchased through offshore trusts, trusts settled in South Dakota, as well as though limited liability companies. The issues surrounding the South Dakota trusts are the current focus of the litigation, according to the WSJ.
South Dakota trust law provides strong protections for privacy and is a popular tax haven for wealthy families. Attorneys for the wife claim to have obtained trust documents to support the argument that the husband retains control over the assets in the relevant trusts.
The wife now says that her husband is using trusts to hide assets and cash to shield her from obtaining a fair share of property in the contentious divorce. The husband argues that he has no control over the trust assets (he further claims that the assets in trust are not communal property under Texas law — asserting that Mrs. Bosarge has no ownership interest in the property).
Attorneys for the wife estimate the total value of assets held in trust that should be available for property division is roughly $2 billion. The husband claimed in a deposition that trust assets were approximately $800 million, while the value of property available for division in the divorce is closer to $12 million.
Complex Disputes Require Sophisticated Legal Analysis
The story highlights how complex estates complicate high-asset property division disputes in divorce. Many rudimentary explanations on the internet seek to answer questions such as, “Who gets the family home in divorce?” – or, “How are retirement accounts handled?” In complex disputes, it is critical to have sophisticated legal analysis beyond the general ideas surrounding property division. Analyzing trusts established in other jurisdictions or offshore, require analysis concerning vested property interests as distinguished from mere expectancies. Critical thinking concerning trust interests in complex divorce litigation includes integrating a synthesis of important aspects of trust law, tax law, business law and family law.
In general, Connecticut courts do not invade trusts in divorce actions. The trustee is typically not joined as a party to the family law litigation. However, there are issues that need to be evaluated to evaluate the disposition of financial interests related to trusts. Courts may consider trust assets, or the income stream a trust may generate, in an overall property division solution. For instance, historical practices related to discretionary distributions, as wells as a beneficiary’s right to withdraw assets or appoint a trustee under the terms of the trust may provide a basis for considering trust assets or income streams in family court. Litigants in divorces are well served to engage a skilled, experienced and thoughtful attorney to provide representation in cases involving trusts that contain substantial assets, and which generate significant cashflow.