Washington Lawyer

A Spouse by Any Other Name: Will the Settlor's Definition of Marriage Prevail After Obergefell

From Washington Lawyer, December 2015

By Linda Kotis

Same Sex Marriage - womenThe U.S. Supreme Court's ruling in Obergefell v. Hodges,[1] validating same-sex marriage under state law, has settled certain issues about the treatment of same-sex spouses for estates and trusts law purposes. For example, upon the death of the first spouse, her estate may take advantage of state as well as federal estate tax marital deductions to pass assets tax-free to her surviving same-sex spouse. A spouse who is dissatisfied with the disposition under her same-sex spouse's last will and testament may now petition the probate court to take an elective share of the decedent's estate;there may even be a retroactive right to pursue the election in the case of a spouse whose death occurred prior to Obergefell.[2]

The same principle would apply in the case of a spouse who died intestate. So, for example, if a couple married in the District of Columbia in 2010 and then moved to Kentucky, which had a constitutional amendment banning same-sex marriage, and one spouse died in Possum Trot in August 2015 without a will, his surviving same-sex spouse would inherit his share of the intestate estate in the same manner the surviving wife of a deceased husband would.

But other questions remain, such as how the law will treat same-sex marriage for purposes of provisions in a testamentary or inter vivos trust affecting the beneficial interest of a beneficiary and his or her spouse based upon the spouse's gender. The issue arises when a definition of "spouse" may be viewed as an unlawful attempt to discourage same-sex marriage (a marriage restraint). For example, must a trustee enforce trust provisions that exclude a child from receiving trust distributions if she is married to a person of the same gender, or limit a power of appointment as available only to a child's surviving spouse who is of the opposite sex as the child?

What should an attorney tell a client about defining a spouse for purposes of a beneficiary's inheritance under a will or trust? How is the policy of honoring the settlor's intent and freedom to dispose of his property balanced with public policy that promotes freedom from interference in marriage?

This article explores the creation of marriage equality through the Obergefell decision and the law on conditions found in wills and trusts affecting marriage. It examines the circumstances under which restraints have been upheld and struck down, and how the principles applied by courts might be interpreted in the context of wills or trust provisions that affect the beneficial interests of a beneficiary and his or her same-sex spouse.

Finally, the article discusses some practical aspects for an attorney—when counseling a testator about imposing restraints in a testamentary document, and when advising a trustee on ways to protect him- or herself with respect to the administration of a trust with conditional provisions.

Legalizing Same-Sex Marriage

The Supreme Court held that state law and state constitutional amendments limiting marriage to a legal union between one man and one woman violated the Fourteenth Amendment of the U.S. Constitution. Specifically, the Court held that prohibiting marriage between same-sex persons is unequal treatment based on gender and a denial of the fundamental right to marry inherent in the "liberty of the person" as protected by the Equal Protection Clause and the Due Process Clause.[3]

The Obergefell majority opinion, written by Justice Anthony Kennedy, analyzed marriage as a contract between two people,[4] not limited to the gender of either person. The result is that a marriage between two men or two women will now be treated for purposes of state law in all 50 states in the same manner as a marriage between a man and a woman.

The arguments characterizing the institution of marriage as a stabilizing force in society have now been applied to same-sex marriage by the Supreme Court in Obergefell: (1) "[T]he right to personal choice regarding marriage is inherent in the concept of individual autonomy . . . The nature of marriage is that, through its enduring bond, two persons together can find other freedoms, such as expression, intimacy, and spirituality. This is true for all persons, whatever their sexual orientation[;]" (2) "[S]ame-sex couples have the same right as opposite-sex couples to enjoy intimate association[;]" (3) "[T]he right to 'marry, establish a home and bring up children' is a central part of the liberty protected by the Due Process Clause [and the] marriage laws at issue here thus harm and humiliate the children of same-sex couples[;]" and (4) "The States have contributed to the fundamental character of the marriage right by placing that institution at the center of so many facets of the legal and social order. There is no difference between same- and opposite-sex couples with respect to this principle."[5]

The general principles on marriage restraints are bound up with the promotion of marriage and the freedom from interference in marriage, honoring the intent of the settlor or testator and the permissibility of conditions on inheritance that do not violate public policy.

Honoring Donor Intent

A settlor or testator is entitled to dispose of his property in accordance with his wishes—cujus est dare, ejus est disponere—in the same manner as a person may make an outright gift to a recipient of his choosing.[6]This entitlement permits the settlor to impose conditions upon a beneficiary of his largesse, and unless the condition is a violation of public policy, courts will uphold such disposition.[7]

The Supreme Court in Obergefell has answered the question of whether a state may proscribe marriage between spouses of the same gender. But constitutional protections do not extend to private conduct, such as the disposition of a testator's property through restrictions placed upon the beneficiary. In Shelley v. Kraemer the Court held that"[the Equal Protection Clause of the Fourteenth] Amendment erects no shield against merely private conduct, however discriminatory or wrongful."[8]

Therefore, the legalization of marriage between spouses of the same gender does not address the question of whether a testator or settlor is prohibited from creating conditions on a gift to a beneficiary who is either married to a same-sex spouse or may one day enter into a same-sex marriage. A restraint on marriage is an attempt to dictate the marriage choices of a person, typically a child, who will inherit from the settlor or testator. As stated above, a testator's intent, as evidenced by restrictions in his last will and testament on a gift of his property, will be upheld so long as such restrictions are not in violation of public policy.

The Uniform Trust Code (UTC) similarly allows the inclusion of conditional gifts in trust.[9] The D.C. Uniform Trust Code states that "[a] trust may be created only to the extent its purposes are lawful, not contrary to public policy, and possible to achieve. A trust and its terms must be for the benefit of its beneficiaries."[10] The Comment to section 404 of the UTC states that "Purposes violative of public policy include those . . . that interfere with freedom to marry or encourage divorce . . . ." The principle is that a trust provision that imposes a condition in relationship to a beneficiary's marital status may not be illegal in and of itself "because of the uses for which the property was to be employed, but because the disposition tended by pecuniary pressure to pursue a line of conduct that as a matter of public policy should be free from such pressure."[11]

There are some states—North Dakota and South Dakota, for example—with specific statutory prohibitions against conditions that restrain marriage. The language in the two states' statutes is nearly identical, with the substitution of the word "spouse" for "widow" in the South Dakota law:

Same Sex Marriage - menValidity of conditions imposing restraints upon marriage. Conditions imposing restraints upon marriage, except upon the marriage of a minor, or of the spouse of the person by whom the condition is imposed, are void;but this does not affect limitations where the intent was not to forbid marriage, but only to give the use until marriage.[12]

Apparently, no court has yet reviewed restraints based on the gender of a spouse.[13] Therefore, we must examine other kinds of marriage restraints to determine the criteria that may dictate enforceability of limitations affecting testamentary dispositions for same-sex spouses.

Enforcing Restraints on Marriage

The cases on marriage restraints describe circumstances where a beneficiary marries outside of the racial, religious, ethnic, or other preferences of the settlor or testator. Under existing case law, the extent to which a restraint has been upheld focuses on whether the restraint is a reasonable, partial restraint on marriage, or whether it is unreasonable or a total restraint.

In Shackleton v. Food Machinery and Chemical Corporation, the U.S. Court of Appeals for the Seventh Circuit stated that "whoever will take the trouble to examine this branch of the law attentively, will find that the testator may impose reasonable and prudent restraints upon the marriage of the objects of his bounty, by means of conditions precedent, or subsequent, or by limitations, while he may not . . . impose perpetual celibacy upon the objects of his bounty by means of conditions subsequent or limitations."[14] The court noted "one single exception" to this rule: "in the case of a husband in making bequests or legacies to his own wife. . . [h]e may rightfully impose the condition of forfeiture upon her subsequent marriage."

Therefore, an absolute prohibition on marriage, such as a trust provision that revokes a gift to a never-married beneficiary because she marries for the first time (a condition subsequent), will not be upheld. For example, in Kennedy v. Alexander the court held that the "devise and bequest to the daughter of the testator, after the death of the widow, created a vested life estate in the daughter, and that the condition that she should hold the estate only so long as she remained unmarried, without limitation over, was an undue and unlawful restraint of marriage, and therefore void."[15]

Conditions that impose reasonable restrictions upon marriage—considered to be partial restraints—are not against public policy. Partial restraints found to be valid have included restrictions on distributions to a beneficiary who marries a named individual, who remarries after the death or divorce of a spouse, who marries prior to a certain age, or who marries without consent of a named person.[16] Restatement (Second) of Trusts § 62 cmt. h (1959) provided that "a provision divesting the interest of the beneficiary if he or she . . . should marry a person of a particular religious faith or one of a different faith from that of the beneficiary, is not ordinarily invalid." This view has apparently been reversed by the Restatement (Third) of Trusts in its characterization of trust provisions contrary to public policy as void.

The Restatement gives as a specific example of an invalid restraint a provision that all of a beneficiary's rights to a trust would terminate if he married a person who was not of a specified religion. The settlor created a trust for her nephew, who was to receive discretionary payments until he turned 18 years old, and all income and discretionary payments of principal until he turned 30, at which time the trust would terminate and he would receive the remaining principal outright. All of his interests under the trust would end if, before his 30th birthday, he married "a person who is not of R Religion," and the remainder of the trust would be given to a college.[17]

The courts have reached various results in cases addressing restraints related to religion, sometimes repudiating and sometimes upholding the condition. The rationale has ranged as follows: (1) striking down a condition because of a dearth of eligible persons who profess the required faith;[18] (2) upholding a condition in a will because it left a sufficiently large pool of potential spouses;[19] and (3) not having to reach the question of the validity of the restraint because an intervening process involving the beneficiaries modified its effect.

As to the last rationale, in In re Estate of Feinberg[20] the Appellate Court of Illinois, relying on the Restatement (Third) of Trusts view, struck down a trust provision that declared any beneficiary who marries outside of the Jewish faith to be "deceased" under the terms of the trust. The Illinois Supreme Court reversed, but rested its holding on the fact that the provision in question had been modified by a beneficiary exercising a power of appointment. Because the other beneficiaries' interests in the trust proceeds did not vest until the death of the beneficiary exercising the power of appointment, and because the marriage restriction as modified did not restrain any future conduct on the part of the beneficiaries after their interests vested, the Illinois Supreme Court failed to reach the question of whether a provision divesting a beneficiary based on a marriage outside of the Jewish faith would be void as contrary to Illinois public policy.

In Himmelfarb v. Horwitz[21] the D.C. Superior Court denied a trustee's request for a declaratory judgment invalidating a trust provision that would divest beneficiaries who married outside of the Jewish faith. The D.C. Court of Appeals reversed, saying that the lower court should have entered the declaratory judgment when it became clear that the trustee and the vested beneficiaries agreed that the provision should be invalidated: "no one named as a defendant in this suit had, at any stage of the proceedings in the trial court, disputed the trustees' and Morton Himmelfarb's claim that the disqualification clause of the 1938 trust is unenforceable." This agreement permitted the court to avoid responding to the "ultimate ruling of the trial court that paragraph D(2) of the 1938 trust constituted a valid, partial restraint on marriage. We do not reach this question."

A settlor may be able to impose his wishes using a condition limiting his child's inheritance to a lifetime interest in trust rather than an outright disposition if the child is married at the settlor's death. For example, in Hall v. Eaton[22] a testator's will devised a life estate in real property to his wife Mildred, and the remainder in equal shares to his son, Linn W. Eaton Jr., and daughter, Cynthia Hall. In the event that Hall was married at the later of the time of the death of Mildred and Mr. Eaton Sr., her share was to be held in trust until such time as she became a widow. If upon her death she was still married (not a widow), her share was distributable to her brother, or if he was deceased, to his descendants. The Appellate Court of Illinois upheld the trial court's dismissal of Hall's suit to overturn the condition, holding that the condition was not an unreasonable restraint on marriage. The court did not view the condition as an absolute prohibition on marriage void as against public policy:

The testator's dominant motive in this case, as reflected in his will, was to protect Hall from misappropriation on the part of her husband. The argument could be made that the restraint was a general one, preventing Hall from being married to anyone, not just her current husband, at the time of Mildred's death. More realistically it should be noted that Hall was married to her current husband at the time the will was executed and at the time of Eaton's death. Eaton's concern was not one with spouses in general but with the particular spouse to whom Hall was married. Linn, Jr., was also married, but no similar restrictions were imposed in his case.[23]

The Hall case is an example where the timing of the realization of the condition played a role in the court's decision to uphold the condition. Another case involving timing related to a bequest is In re Clarke's Estate.[24] The testator conditioned bequests to her son Eugene on his marital status at the time of her death. If Eugene remained married to Clara on the date of his mother's death, he would receive only $5,000. If he were to be divorced or widowed, he would receive one-third of the residue of the estate. Eugene challenged the conditions as encouraging divorce and therefore void as contrary to public policy. The court upheld the conditions because "there was nothing that Eugene W. Clarke could do to increase or diminish the amount he would receive under the will. His portion was fixed absolutely as of the time of the death of the testatrix and his then status with respect to his wife Clara. There was then no inducement for him to destroy the marriage status, for it could avail him of nothing."[25]

Analyzing Types of Restraints

In the advent of Obergefell, it is now appropriate to analyze the enforceability of certain types of restraints on same-sex marriage in the same manner as an opposite-gender marriage. Take a situation such as in Hall, for example, where the restriction was upheld based upon the timing. Suppose Cynthia Hall had been married to a woman at the time of the testator's death, and suppose the same clause in her father's will required her remainder interest to remain in trust. Suppose the will contained no definition of marriage and no mention of the gender of a spouse. A court would have still applied the same reasoning to uphold the provision because the timing of the beneficiary's marriage and the consequences with respect to the interest inherited led the court to conclude that the restraint was not a general prohibition on marriage.

Suppose instead that the testator's will had read as follows: "In the event that my daughter, Cynthia Ann Hall, shall be married to a woman at the date of the death of the latter to die of my spouse and myself, I give that portion of the estate, which would have passed to my daughter, to Mercantile Trust and Savings Bank, Quincy, Illinois, as trustee of the 'Cynthia Ann Hall Trust.'"

The court's reasoning that Eaton's concern was not with spouses in general but with the particular spouse to whom Hall was married could still be applied in this example. Hall would have been married to her current spouse, a woman, at the time the will was executed and at the time of her mother's and father's death. Perhaps the father was hopeful that his daughter would separate from or divorce her spouse. After all, the hypothetical clause does not contain any limiting language if Hall was to be married to a man. Does the will then contain an impermissible condition to a devise, the tendency of which is to encourage divorce or separation, and so is against public policy?[26]

Although the will was silent regarding Hall's being divorced at the time of her father's death, it did not restore the outright distribution to her in the event she were to be separated or divorced. The only circumstance under which an outright interest would be available, once the trust came into existence, would be if Hall were to be widowed. As the court in Hall stated, "[t]he trust is written in terms which seemingly did not anticipate that Hall might be divorced."[27]

What about a provision that denies distributions to a current beneficiary who marries a same-sex spouse in the future?

Scenario 1: In December 2015, J.R. was planning to marry Cliff in an elaborate ceremony at their ranch in Dallas. J.R's father, Jock, established a trust for J.R.'s benefit 10 years ago, funded with the proceeds from the sale of Ewing Solar Panels, a subsidiary of Ewing Oil. The trust provides for discretionary distributions of income and principal "to the beneficiary, his spouse, and his descendants, for health, education, maintenance, and support (HEMS), provided however that if any beneficiary marries, no further distributions to said beneficiary or his or her spouse shall be made unless such beneficiary is the wife of a husband or the husband of a wife." On the death of the beneficiary, a surviving spouse is entitled to an income interest for life. Following the marriage, should the trustee be making distributions to J.R. and Cliff during J.R.'s life? What about the income interest to Cliff after J.R.'s death?

The definition of spouse restricts marriage to a man married to a woman, or to a woman married to a man. The practical effect of this provision is a total restraint on any marriage by a beneficiary whose sexual orientation is directed toward the same gender. The provision revokes the gift to J.R., a never-married beneficiary, because he marries for the first time. Therefore, the condition would be void, and the trustee should continue making distributions to J.R. during his lifetime. The situation differs with respect to Cliff's potential interests under the trust. Cliff would not qualify as a beneficiary from the date the trust was established because he would not be J.R.'s spouse until the date of their marriage. The provision does not revoke but denies a potential gift to Cliff. This condition precedent, therefore, should be upheld.

What about a provision that does not deny but instead limits distributions to a beneficiary who marries a person of the same sex?

Scenario 2: Johnny Fever and his sister Jennifer are beneficiaries of a trust established in August 2015 by their mother, a native of Cincinnati. The trust is sitused under Ohio law. The trust is funded with income-producing assets that yield in excess of $500,000 a year. The trust provides for quarterly distributions of income and discretionary distributions of principal "to the beneficiary and his or her descendants, for health, education, maintenance, and support." The trustee has discretion to limit distributions of income and principal to no more than $500 a year to a beneficiary whose spouse is not a person of the opposite gender. Jennifer married her girlfriend Bailey in 2012 in D.C., three years before the trust was established. In January 2015, Johnny Fever married Mrs. Carlson, a widow and the owner of the radio station where he works. The trustee is seeking guidance on whether he must comply with this limitation on distributions to Jennifer.

There are several ways to look at this situation. First, as in Hall, at the time the trust was established, both Johnny Fever and Jennifer, like Cynthia Hall, were already married to their spouses. The gift to Jennifer was not revoked but subject to limitations based upon marital status. Her mother's concern could be viewed with respect to the particular spouse to whom Jennifer was married, as was the court's conclusion in Hall. The trustee already had discretion in making distributions and could treat Jennifer differently than her brother. Furthermore, if the reduction of the income interest to a de minimis amount had been conditioned upon Jennifer's marital status at the time of her mother's death, as in In re Clarke's Estate, then the finding of a valid partial restraint might be applicable here. As was the case for Eugene Clarke, Jennifer could take no action to increase or diminish the amount she would receive under the trust because her interest and marital status would be determined absolutely as of the time of her mother's death.

But what if the reduction in distributions were viewed as compromising Jennifer's legal obligation to support her spouse? Under common law, a husband has an obligation to provide food, shelter, clothing, and medical care to his wife, known as the "doctrine of necessaries." This doctrine has been made applicable by Ohio statute to "married persons," as well as by statute in D.C. to "spouses."[28] After Obergefell, a married person under Ohio law includes a same-sex spouse, in the same way that D.C. law has included same-sex persons in the definition of spouse since allowing same-sex marriage in 2010. Therefore, the legal obligation to support one's spouse applies to Jennifer and Bailey based on the laws of the jurisdiction in which they live, and is also the rule under the governing law of the trust.

With respect to provisions in a trust, Restatement (Third) of Trusts § 50 cmt. d(2) (2003) provides: "A support standard normally covers not only the beneficiary's own support but also that of persons for whom provision is customarily made as a part of the beneficiary's accustomed manner of living. This generally includes the support of members of the beneficiary's household and the costs of suitable education for the beneficiary's children . . . ."

The trustee would need to consider Bailey's support needs in making distributions to Jennifer, in the same way that the trustee must consider the needs of Mrs. Carlson in determining distributions to Johnny Fever. Therefore, it is possible that a court would not uphold the limitation of the definition of spouse to an opposite-gender person and would require the trustee to ignore the diminution of distributions.

What about conditions that address gender, but are not directly related to the interest of the beneficiary herself?

Scenario 3: Same facts as in Scenario 2, except that the definition of spouse is only in the context of a surviving spouse, that is, "a surviving husband of a deceased wife and a surviving wife of a deceased husband." On the death of the beneficiary, a surviving spouse does not have an income interest but instead is granted a limited power of appointment, exercisable in favor of the beneficiary's descendants, so long as the surviving spouse is a person of opposite gender.

The cases on marriage restraints and the effect on a beneficial interest describe the situation wherein the beneficiary marries outside of the preferences of the settlor or testator, not the powers of the spouse or surviving spouse. It is possible that this definition of surviving spouse, that excludes persons of the same sex as among the donees of a power exercisable after the death of the beneficiary, is a legitimate partial restraint, or even no restraint at all. The definition does not affect the beneficiary's or the spouse's lifetime interest in income or principal. The trustee is not precluded from making distributions to Jennifer or Bailey during the beneficiary's lifetime, based on the spouse's gender, so the result is not the revocation of a gift based on marital status. Bailey could not under any circumstance exercise the power of appointment in her own favor, so no future beneficial interest is being denied. "[W]here [conditions in restraint of marriage] are only partial and confined within reasonable limits, the law does not pronounce them void, if they do not unduly interfere with the beneficiary's right of choosing whom and when he will marry."[29]

Applying Obergefell Retroactively

The Supreme Court in Obergefell held not only that same-sex couples have the fundamental right to marry in all states, but also that "there is no lawful basis for a State to refuse to recognize a lawful same-sex marriage performed in another State on the ground of its same-sex character."[30] Therefore, a marriage that was validly performed in another jurisdiction permitting same-sex marriage prior to June 26, 2015, such as the District of Columbia, will now be recognized in every other state, since state prohibitions on same-sex marriage have been repudiated as unconstitutional by the Supreme Court's decision.

Furthermore, this recognition will be retroactive: "An unconstitutional act is not a law;it confers no rights;it imposes no duties;it affords no protection;it creates no office;it is, in legal contemplation, as inoperative as though it had never been passed."[31] Let's take a look at how this might play out in the hypothetical below.

Scenario 4: Zeb established a trust in September 2011 for the benefit of John-Boy and John-Boy's sister Mary Ellen, two of his seven grandchildren. Among other assets, the trust owns mineral rights in Walton's Mountain and is sitused in Virginia. The trust is divided into separate trusts for John-Boy and Mary Ellen, and each trust provides for discretionary distributions of income "to my grandchild, his or her spouse, and his or her descendants." John-Boy and Ike were married in April 2011 in D.C. Mary Ellen and Dr. Curtis Willard were married in Virginia in December 2011. The trustee has been making semi-annual income distributions to John-Boy and Mary Ellen since the creation of the trust, as well as to Mary Ellen's husband Curtis beginning in January 2012. On July 1, 2015, the trustee notified Ike of his inclusion as a beneficiary of the next semi-annual income distribution.

At the time of John-Boy's and Ike's marriage in D.C., the law in Virginia declared that "[a]ny marriage entered into by persons of the same-sex in another state or jurisdiction shall be void in all respects in Virginia and any contractual rights created by such marriage shall be void and unenforceable."[32] Therefore, the trustee did not make distributions to Ike from 2011 through 2015 because he was not recognized as John-Boy's spouse under Virginia law, the governing law of the trust.

Now, as a result of the Obergefell decision, John-Boy and Ike are deemed to have been married in Virginia at the time the trust was established in 2011. This poses the question of whether the trustee's failure to make discretionary distributions to Ike as John-Boy's spouse creates liability for breach of trust.

The trustee made distributions during prior years based upon Virginia law in effect at the time. There was no mistake of law as to whether Ike was legally recognized as John-Boy's spouse under Virginia law. There was no mistake of fact at that time as to whether they had been married in D.C. The UTC as enacted in Virginia absolves a trustee of liability for a reasonable mistake as to the status of a beneficiary, stating that "[i]f the happening of an event, including marriage, divorce, performance of educational requirements, or death, affects the administration or distribution of a trust, a trustee who has exercised reasonable care to ascertain the happening of the event is not liable for a loss resulting from the trustee's lack of knowledge."[33]

Suppose, however, the trustee had been concerned about the disparate treatment of the two spouses, and therefore had sent accountings to John-Boy and Ike, and Mary Ellen and Curtis, in order to give them an opportunity to raise objections. Under the UTC, a one-year statute of limitations may apply if the beneficiary is sent "a report that adequately disclosed the existence of a potential claim for breach of trust and informed the beneficiary of the time allowed for commencing a proceeding."[34] This compliance with the state's annual reporting requirements would limit the time frame in which a beneficiary may bring a claim against the trustee.

Separate from this question is whether John-Boy and Ike could seek retroactive distributions to Ike to make up for the past four years. The retroactive application of Obergefell would recognize the marriage of John-Boy and Ike as valid in Virginia from the beginning date of the trust's creation in 2011. Therefore, Ike would be entitled to distributions from the grandfather's trust as John-Boy's spouse from that time, in the same manner as Curtis was entitled to distributions as Mary Ellen's husband from the date of their marriage in 2012.

What if the trust had defined a spouse as the wife of one husband or the husband of one wife? Would retroactive distributions from the trust still be available to Ike? Could Ike receive distributions now?

When the trust was created, the trust provision complied with the definition of marriage under Virginia law. Simply because this gender-based provision is no longer the state's definition of marriage does not mean it is invalid under a trust governed by Virginia law. The definition would need to be analyzed as a potential restraint on marriage.

The definition has no effect upon John-Boy's beneficial interest in the trust. His marriage to a man, or lack of marriage to a man or woman, does not revoke his status as a beneficiary or limit his semi-annual distributions of income. Further, the provision does not prevent John-Boy from marrying any person of any gender. Its only effect is to disqualify Ike as a beneficiary at the outset.

Counseling Clients and Trustees

When an attorney represents a client seeking advice on estate planning, the result may be the drafting of a new will or trust, or an amendment to existing documents to implement the provisions of the client's estate plan. When the client's existing documents contain conditions affecting a beneficiary's interest that are related to marriage or the gender of a spouse, this presents an opportunity to educate the client on the law of marriage restraints.

The attorney should advise the client that conditions forbidding same-sex marriage or divesting his daughter of her interest under a trust based on her marriage to a woman would likely not be upheld, if his daughter were to file suit. It would be prudent to let the client know that if his intent is to impose certain limitations on the beneficial interest of his child falling short of a total prohibition against the marriage, the conditions could be upheld, provided such provisions do not compromise his daughter's obligation under state law to support her spouse. Even when the legality of a provision is subject to debate, the client should know that restricting inheritance based on his child's same-sex marriage is likely to disrupt family harmony. But, ultimately, it is the client's decision whether to include such provisions in his documents.

When a trustee is seeking advice on dealing with conditions affecting a beneficiary's interest that are related to marriage, the UTC, as enacted in the District of Columbia, Virginia, and most recently in Maryland (effective January1, 2015), provides some options.[35] This may be with respect to current and future issues as well as to past activity, because under certain circumstances, the Supreme Court's decision may have resulted in the creation of retroactive rights and benefits.

Asking for Court Intervention

A trustee may seek guidance from a court without having the parties involved in an adversarial proceeding. The UTC allows an interested person, which includes a trustee or beneficiary, to petition a court to intervene in the administration of a trust. This is permissible for "any matter involving the trust's administration, including a request for instructions and an action to declare rights."[36]

Providing Reports

As previously mentioned, making information available has the benefit of allowing beneficiaries to raise any objection they may have. An accounting with adequate disclosure would limit the time frame in which a beneficiary may bring a claim against the trustee. Adequate disclosure is defined as a report that "provides sufficient information so that the beneficiary or representative knows of the potential claim or should have inquired into its existence."[37]

What actually constitutes adequate disclosure is subject to debate [38] and beyond the scope of this article. Compliance with the requirements of the duty to inform—"a report of the trust property, liabilities, receipts, disbursement, and distributions, including the source and amount of the trustee's compensation, a listing of the trust assets, and . . .their respective market values"[39]—should be sufficient.[40]

If the trustee does not comply with the reporting requirements, he faces the threat of liability for a significant period of time. Under D.C. law, a beneficiary may bring a judicial proceeding for breach of trust within three years after the first to occur of (1) the removal, resignation, or death of the trustee;(2) the termination of the beneficiary's interest in the trust;or (3) the termination of the trust.[41] In Virginia, a similar statute gives the beneficiary five years to make his or her claim.[42] The resulting exposure for the trustee may actually be much longer than the three-to-five-year period.

Entering Into a Settlement

D.C. and Virginia trust codes allow for private settlement agreements between interested persons[43] that are binding on the beneficiaries.[44] Matters that may be resolved by a nonjudicial settlement agreement include the following: "(1) The interpretation or construction of the terms of the trust;(2) The approval of a trustee's report or accounting;(3) Direction to a trustee to refrain from performing a particular act or the grant to a trustee of any necessary or desirable power;[. . .] and (6) Liability of a trustee for an action relating to the trust."[45] A trustee could engage the beneficiaries in an effort to reach an agreement on the role of a beneficiary's same-sex spouse as a potential distributee under the trust, actual distributions to such a person as shown on an accounting, or the consideration of such person's resources in making a distribution to the named beneficiary.[46] In implementing a settlement agreement, the trustee and beneficiaries should seek advice on the potential tax consequences.[47]

Conclusion

The legalization of same-sex marriage by Obergefell means that the enforceability of gender-based inter vivos and testamentary conditions will be more closely aligned with conventional principles governing the permissibility of marriage restraints. In addition, the retroactive recognition of marriages under state law will generate opportunities to seek benefits based upon marital status unlike those available to heterosexual couples who challenge conditional provisions. Beyond these results, however, are the potential challenges when the presence of a same-sex spouse is viewed differently than an opposite-gender spouse for purposes of bestowing gifts upon future generations. Though the law will not always require equal treatment of both types of marriages under a will or trust, the careful testator is advised to consider the consequences of limitations on the members of his or her family both now and in the future.


Linda Kotis practices trusts and estates law in the D.C. office of Ivins, Phillips & Barker.


Notes

[1] 576 U.S. ___ (June 26, 2015).

[2] George Karibjanian, Obergefell et al. v. Hodges: The Final Word on Same-Sex Marriage Is Actually Just the Beginning, LISI Estate Planning Newsletter #2326 (July 23, 2015), available at www.leimbergservices.com.

[3] See Obergefell Majority Opinion at p. 22.

[4] Id. at pp. 3, 28.

[5] Id. atpp. 12–15, 17.

[6] Loring and Rounds: A Trustee's Handbook § 9.24, "The Incentive Trust (and the Public Policy Considerations);Marriage Restraints;Provisions Encouraging Anti-Social Behavior" (2015).

[7] See, e. g., In re Forte's Will, 267 N.Y.S. 603, 605 (Sur. Ct. 1933).

[8] 334 U.S. 1, 13 (1948).

[9] See, e.g., Va. Code Ann. § 64.2-703.B;Fla. Stat. Ann. § 736.0105(2);Md. Code Ann., Est. &Trusts § 14.5-105.

[10] D.C. Code Ann. § 19-1304.04.

[11] Austin W. Scott and William Franklin Fratcher, Scott on Trusts § 62.9 (4th ed. 1989).

[12] S.D. Codified Laws § 43-3-4 (2015).

[13] This is also the conclusion of other commentators. See, e.g., Emalee G. Popoff, Testamentary Conditions in Restraint of the Marriage of Homosexual Donees, 7 Drexel L. Rev. 163, 167 (2014) ("As yet, no court has explicitly accounted for the sexual orientation of a donee in determining whether a condition in restraint of the donee's marriage is an unenforceable violation of public policy");William P. LaPiana, Married Same-Sex Couples Living in Non-Recognition States: A Primer, 7 Est. Plan. &Community Prop. L.J. 417, 468 (Summer 2015) ("The constructional problems [with respect to donative instruments making gifts on the basis of who is married to whom] created by the legalization of same-sex marriage will work themselves out through litigation or perhaps legislation in the years to come").

[14] 279 F.2d 919 (7th Cir. 1960), citing Shackelford v. Hall, 19 Ill. 212, 214 (1857).

[15] 21 App. D.C. 424, 439 (1903).

[16] See, e.g., Restatement (Second) of Property Donative Transfers § 6.2 (1983).

[17] Restatement (Third) of Trusts § 29 cmt. j, illus. 3 (2003).

[18] See Maddox v. Maddox's Adm'r, 52 Va. (11 Gratt.) 804, 808 (1854) (a condition in a will that had the effect of prohibiting a beneficiary from marrying outside of the Quaker Church unreasonably restricted the party in the choice of marriage because too few Quakers were available to marry).

[19] See Shapira v. Union Nat'l Bank, 315 N.E.2d 825, 827, 829, 832 (1974) (testator's son was required to marry a Jewish woman within seven years of testator's death in order to receive a share of the residue;the time frame was "one which would give the son ample opportunity for exhaustive reflection and fulfillment of the condition without constraint or oppression").

[20] 891 N.E.2d 549 (Ill. App. Ct. 2008).

[21] 536 A.2d 86, 90, 91 (D.C. 1987).

[22] 631 N.E.2d 805 (Ill. App. Ct. 1994).

[23] Id. at805, 808.

[24] 98 Colo. 321, 57 P.2d 5 (1936).

[25] 57 P.2dat 8.

[26] Hall, 631 N.E.2d at 807.

[27] Id. at 809.

[28] See Ohio Rev. Code § 3103.03;D.C. Code Ann. § 46-601(b)(2). Further, some jurisdictions, such as Maryland and Virginia, have made willful nonsupport of one's spouse a crime. See Md. Code Ann., Family Law, § 10-201;Va. Code Ann. § 20-61.

[29] See Watts v. Griffin, 50 S.E. 218, 219 (N.C. 1905).

[30] Obergefell Majority Opinion at p. 28.

[31] Norton v. Shelby County, 118 U. S. 425, 442 (1886).

[32] Va. Code Ann. § 20-45.2.

[33] Id. § 64.2-798.

[34] See Va. Code Ann. § 64.2-796.A;D.C. Code Ann. § 19-1310.05(a).

[35] My colleagues and I recommended some of these steps in our 2010 article. See Richard Franklin, Linda Kotis, and Matthew MacLean, Same–Sex Marriage: Looking Beyond the Rhetoric, Wash. Law., Nov. 2010.

[36] See D.C. Code Ann. § 19-1302.01(a), (c);Va. Code Ann § 64.2-710.A, C;Md. Code Ann., Est. &Trusts, § 14.5-201(a), (c).

[37] D.C. Code Ann. § 19-1310.05(b);Va. Code Ann. § 64.2-796.B.

[38] See Martin D. Begleiter, In the Code We Trust—Some Trust Law for Iowa at Last, 49 Drake L. Rev. 165, 275–76 (2001) ("Is the reporting of the transaction involved enough? Must the trustee provide details? If so, how much in the way of details? Or must the trustee say, in the account, something to the effect of: 'This transaction could be questioned because . . .?' Some might think the last suggestion is laughable. However, in one case, in which a prior judicially settled account was attacked on grounds of self-dealing, the investment was listed in the account. The court vacated the order approving the account on the ground that the facts showing the illegality were not reported in the account.").

[39] D.C. Code Ann. § 19-1308.13(c)(6);Va. Code Ann. § 64.2-775.C;Md. Code Ann., Est. &Trusts, § 14.5-813(c)(1).

[40] S. Alan Medlin, The Impact of Significant Substantive Provisions of the South Carolina Trust Code, 57 S.C. L. Rev. 137, 190 (2005).

[41] D.C. Code Ann. § 19-1310.05(c)(1)–(3).

[42] Va. Code Ann. § 64.2-796.C.

[43] Interested persons are those "persons whose consent would be required in order to achieve a binding settlement were the settlement to be approved by the court." See D.C. Code Ann. § 19-1301.11(a);Va. Code Ann. § 64.2-709.A.

[44] The Maryland Trust Act does not include this provision. Therefore, beneficiaries under a Maryland trust would be limited to court proceedings.

[45] D.C. Code Ann. § 19-1301.11(d)(1), (2), (3), (6);Va. Code Ann. § 64.2-709.D(1), (2), (3), (6).

[46] A trustee or beneficiary concerned about whether such agreement is contrary to law or public policy, or if the interests of minors or unborn descendants were adequately represented, may request the court to approve the agreement. D.C. Code Ann. § 19-1301.11(e);Va. Code Ann. § 64.2-709.E.

[47] See generally BNA Portfolio 804-1st, Probate and Administration of Decedents' Estates, V.C.2;Linda L. Kotis, Matthew J. MacLean, David G. Keyko, and Richard S. Franklin, Same-Sex Spouses, Partners and Adult Adoptions: Trust Administration Issues Presented by Beneficiary Relationships, at p. 28, ABA Fall 2010 Joint CLE Meeting, Section of Taxation and Trust and Estate Law Division of Section of Real Property, Trust and Estate Law, Sept. 24, 2010 ("For example, pursuant to Treas. Reg. § 20.2056(c)-2(d)(2), if a property interest is assigned or surrendered to the surviving spouse in settlement of a will controversy, the interest will be regarded as having 'passed from the decedent to the surviving spouse,' enabling qualification for the estate tax marital deduction, only if the assignment was a 'bona fide recognition of enforceable rights of the surviving spouse in the decedent's estate.'For income tax purposes, if a beneficiary disposes of one interest for another interest that is materially different, the beneficiary may have a taxable realization event under section 1001(a) of the Internal Revenue Code. Generally, interests are 'materially different' if they involve legal entitlements that are different in kind or extent. Special care is also required to avoid disturbing the exempt status of a trust that is grandfathered from the GST tax or exempt by allocation of GST exemption.").