How the Court Considers Trusts in a Divorce

A trust is an arrangement in which one person, the trustee, holds legal title to the property for the benefit of another person, the beneficiary. The court must determine whether the trust is a marital or nonmarital property in a divorce. If the trust is considered marital property, it will be subject to division between the spouses as part of the overall distribution of marital property. Whether the trust is considered marital or nonmarital property depends on several factors, including whether the trust was created during the marriage, whether the spouse has an interest in the trust, and whether the trust assets are commingled with other marital assets.

How Can Trusts Protect Assets from Divorce?

Trusts can protect assets from divorce by keeping them out of the hands of a spouse. If a trust owns the property, it is considered separate property and is not subject to division in a divorce. This separation can protect your assets from being divided up by a court. Trusts can also protect your assets from creditors in a divorce.

Can a Revocable or Irrevocable Trust Protect Assets from Divorce?

A trust is an arrangement in which one person, the trustee, holds legal title to the property for another person, the beneficiary. An irrevocable trust cannot be modified or terminated without the beneficiaries' consent. On the other hand, a revocable trust can be altered or dissolved by the grantor at any time.

If you put assets into a revocable trust, those assets are still considered part of your estate and can be divided in a divorce. However, if you have an irrevocable trust, the assets in the trust are not considered part of your estate and can't be divided in a divorce.

It's important to note that even if a trust is irrevocable, there are still some circumstances in which the assets in the trust can be divided in a divorce. For example, if the trustee violates the terms of the trust or if the beneficiary waives their interest.

Ultimately, whether or not an irrevocable trust can protect assets from divorce depends on the type of trust and how it's structured. If you're considering using a trust to protect assets

If You and Your Spouse Created a Living Trust Before Your Divorce

If you and your spouse created a living trust before your divorce, the trust is still valid after your divorce. The divorce does not invalidate the trust. The terms of the trust remain in effect and control how your assets are held, managed, and distributed. You can revoke or terminate the trust anytime, but trusts are often revocable during the marriage. If you have a divorcing spouse, you may want to consider changing the terms of your trust, especially if you have assets in a living trust that you want to keep separate from your spouse's property in a divorce.

What Is a Domestic or Foreign Asset Protection Trust?

A domestic or foreign asset protection trust is a type of trust that is often used to protect assets in the event of divorce. Assets in the trust are considered separate property and are not subject to division in a divorce. The trust beneficiary is typically the spouse, but the trustee has discretion over how the assets are distributed.

Updating Your Estate Planning Documents After a Divorce

If you have an estate plan created before your divorce, it is crucial to update it after it is finalized. Your divorce lawyer can help you with this process. You will need to update the trustee and beneficiary information if you have a trust. You may also need to change your power of attorney and health care directives.

If You or Your Ex-Spouse Inherited Property From a Trust

If you or your ex-spouse inherited property from a trust, that property might be considered marital or separate. This designation is dependent upon how the trust is structured. For example, if the trust is set up so that the inherited property is used for the benefit of the marriage, then it is considered marital property. However, if the inherited property is held in the trust for the benefit of one spouse only, it is regarded as separate property. Inherited property can become very complicated in a divorce, so it is crucial to speak with an attorney to determine how it will be classified.

The role of a prenuptial agreement

If you're getting married, congratulations! You're embarking on a new chapter in your life. But before you walk down the aisle, you must have a serious discussion with your fiancé about your finances. One way to do this is to sign a prenuptial agreement.

A prenuptial agreement is a legal contract that outlines how you and your spouse will handle finances during the marriage and in the event of a divorce. It can protect your assets and ensure both spouses are on the same page about financial expectations.

While some people view prenuptial agreements as unromantic, they can be an intelligent way to safeguard your future. However, suppose you're considering signing a prenup. In that case, you must consult an experienced family law attorney who can help you understand the implications and ensure the agreement is fair and legally binding.

Feel free to call the ALTA Estate Services, LLC office at (520) 797-1400 to learn more about proper and complete estate planning, including the Emergency Telephone Hotline Program afforded to you and your family members at no charge during times of crisis and the other benefits of estate planning described above. Mark Fishbein, Tucson, AZ.

The text above is for general informational purposes only and should not be considered legal advice. For more information, click Contact Us. Follow Mark Fishbein on YouTube.