The case centers on the Matter of Katherine E. Reece Trust, established by the will of Katherine’s late husband, Oliver Frascona. Katherine Reece and Frascona married in 2004, signing a marital agreement concerning asset division. In 2011, Frascona’s will established a trust with Reece and Frascona’s children as beneficiaries, providing for Reece's support. This trust became a focal point after Frascona’s unexpected death in 2014, following a legal separation from Reece.
Trust Provisions and Legal Separation
Frascona’s will dictated that the trust would support Reece at the standard of living she maintained “during the marriage.” However, Reece and Frascona had separated, with a legal decree in 2013. While the marriage technically continued until Frascona’s death, Reece had lived separately and managed her finances. This context raised questions regarding the period used to measure Reece’s standard of living, leading to a dispute on how to apply the trust's terms.
Probate Court Ruling and Appeal
After Frascona’s death, the trustee BOKF, N.A., sought clarification on the trust's administration, specifically about measuring Reece’s standard of living. The Denver Probate Court determined that her standard of living should reflect the period from the legal separation to Frascona’s death, factoring in her separate financial responsibilities. Reece appealed, arguing that her standard of living should be assessed from earlier marital years before the separation.
Court of Appeals Decision
On appeal, the Colorado Court of Appeals agreed with the probate court’s interpretation. The court held that since the trust became irrevocable at Frascona’s death, Reece’s standard of living should reflect her status and expenses at that time. The court referenced the Restatement (Third) of Trusts, which states that a beneficiary’s standard of living typically aligns with conditions at the settlor’s death, especially when a trust is irrevocable. Thus, the court affirmed the probate court's order.
Conclusion
The decision clarifies how trustees may interpret standard-of-living clauses in cases of legal separation. For those seeking guidance on trust disputes or clarifying beneficiary rights, Whitcomb, Selinsky PC offers expertise in estate law and trust management, helping clients ensure that trust provisions are appropriately upheld.
Joe Whitcomb
