Chapter 2 - § 2.14 • APPLICABLE STATE LAW

• Jurisdiction: Colorado

§ 2.14 • APPLICABLE STATE LAW

If the governing law of a trust instrument is of a jurisdiction that does not treat a trust interest as property until the interest is possessory (such as Pennsylvania or Wyoming), will the court of a different jurisdiction whose property division law is dissimilar (such as Colorado or Massachusetts) apply the law governing the trust instrument or its own law for property division purposes? The Supreme Court of Connecticut in Tremaine v. Tremaine³²⁷ answered this question by holding that although the construction of the trust instrument is to be governed by the law stated to be applicable in the trust instrument, the ultimate question of whether the value of the trust constitutes a spouse's property for purposes of a divorce is determined under the law of the divorce tribunal.³²⁸

In Flaherty v. Flaherty,³²⁹ the husband's parents were Massachusetts residents. The parents created an irrevocable trust governed by Massachusetts law. The assets of the trust were found to have been based in Massachusetts. The husband argued that "jurisdiction of the . . . trust belonged to a Massachusetts court, and that Massachusetts law should have been applied to the trust."³³⁰ "In determining whether the [trial] court should have exercised or declined to exercise its jurisdiction," the New Hampshire Supreme Court held instead that "[s]ince the New Hampshire [trial] court issued the divorce decree, it should decide every facet of the property division, including the [husband's] remainder interest in the trust."³³¹

When spouses move from one jurisdiction to another, a related issue is whether the law of the jurisdiction where the spouses resided at the time the property was "acquired" applies or whether the law of the jurisdiction where the divorce is granted is applicable. For example, if a spouse becomes a beneficiary of a trust at a time when the spouses are living in Wyoming, but the spouses later move to Colorado, is it Wyoming or Colorado law that is applied in determining whether the trust interest constitutes property? The term "partial mutability" refers to the application of law of the state where the parties resided when the particular property was acquired, and the term "total mutability" has been used to refer to the application of the law of the divorce court in determining the parties' rights in a property division, regardless of where or when the property was acquired.³³² "[A] minority of U.S. states apply the law of the place...