New Jersey Appellate Court Rules That Trustees Cannot Be Ordered To Disburse Trust Assets to Satisfy Alimony And Child Support Obligations Of Divorced Spouse Beneficiary

In Lerman v. Lerman, Docket No. A-1953-07T3 (App. Div., August 4, 2009), the trustees of a trust established and funded by defendant David Lerman’s deceased mother, Pearl Lerman, appealed from an order of a Family Court Judge in New Jersey directing that Bank of America turn over $50,000 of the trust’s assets to the Bergen County Probation Services Division in partial payment of defendant’s alimony and child support arrearages. At the time the order was entered, defendant owed his ex-spouse $657,363.05 in alimony and child support arrearages, and he had been incarcerated for non-payment. On appeal, the appellate court reversed that lower court’s order, holding that a New Jersey court may not order the trustees to make disbursements since the assets in the trust belong to the trust, not to defendant, a lifetime beneficiary; the trust, which was maintained in Florida, had no contacts with New Jersey; and the trust is subject to Florida law, which recognizes the validity of spendthrift trusts in which disbursements from the trust are wholly within the trustees’ discretion. Although the case ultimately turned on the appellate court’s holding that the trial court improperly exercised jurisdiction over the assets of the trust, the court also held that:

The validity of spendthrift trusts is also recognized by New Jersey. In re Estate of Bonardi, 376 N.J. Super. 508, 516 (App. Div. 2005); Constanza v. Verona, 48 N.J. Super. 355, 359 (Ch. Div. 1958). Accordingly, even if the trial court had jurisdiction over the Trust, the court could not have ordered the trustees to disperse funds from the trust to pay an obligation of defendant.

The Lerman v. Lerman case can be found here – Lerman v. Lerman