Oregon Court Rules Revocable Living Trust an Expectancy

The Oregon Court of Appeals, in a case of first impression, recently held that a husband's interest in a revocable living trust is an expectancy and therefore not subject to division during divorce. The court reasoned that the husband's interest is more akin to an expectancy under a will than a contingent interest in a trust, which is a divisible property interest because the settlor has given up all interest in the trust property. The court also noted the difficulties associated with dividing an interest in a revocable living trust or taking it into account in dividing the rest of the marital assets.

The dissent thought the husband's interest more akin to a contingent interest in a trust than an expectancy under a will. The dissent concluded that a contingent interest in a trust and an interest in a revocable living trust are the same in practice, the only difference being that the former interest is lost because a contingency fails to occur and the latter is lost because a settlor revokes. The dissent noted the disparity that resulted in this case:

As a result, wife emerges from this dissolution of the marriage (during which she enjoyed, according to the trial court, a "reasonably good standard of living") with a maximum income from employment of less than $13,000 per year, no housing, and nothing to show for her contributions of money and labor to the home in which she and husband lived for 23 years, while husband will have rent- or mortgage-free housing, a larger income, and, in all probability, a soon-to-be-realized half interest in two parcels of Willamette Valley farm property.