Ferri v. Powell-Ferri

In 1983, Paul Ferri Sr. set up an irrevocable trust (the 1983 trust) for the sole benefit of his son, Paul Ferri Jr. (Ferri) (plaintiff) under Massachusetts law. Under the 1983 trust, trust assets could be distributed in two ways: (1) the trustee could exercise his broad discretion to distribute or irrevocably segregate trust assets, or (2) Ferri could withdraw an ever-increasing, fixed percentage of trust assets starting at age 35. In 2010, Ferri’s wife, Nancy Powell-Ferri (defendant), filed for divorce in Connecticut. Shortly after, without Ferri’s prior knowledge or consent, the trustee of the 1983 trust decanted, meaning transferred, the 1983 trust’s assets into a new trust (the 2011 trust) to shield trust assets from the pending divorce action. When the 1983 trust was decanted, Ferri had an unexercised right to withdraw up to 75 percent of the 1983 trust’s assets. Unlike the 1983 trust, the 2011 trust was a spendthrift trust that barred Ferri from withdrawing or exercising control over any trust assets, thereby shielding the 2011 trust’s assets from Ferri’s creditors, including Powell-Ferri. The trustee retained sole control over the 2011 trust. Ferri filed a Massachusetts action for a declaratory judgment authorizing the trustee’s choice to decant the 1983 trust. Specifically, Ferri argued that decanting was within the trustee’s broad discretion if necessary to protect trust assets, including in the event of divorce. Powell-Ferri countered, arguing that the decanting violated the 1983 trust’s terms because at the time of the decanting Ferri had a vested, irrevocable right to withdraw and control up to 75 percent of the 1983 trust’s assets. The Massachusetts trial court ordered the trustee to restore the decanted trust assets. Ferri appealed.