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Episode 78 of the Divorce and Your Money Show discusses trusts and how they are affected in a divorce.   Legal trusts are often used for such things as estate planning and asset protection. They can also be used for gifting, asset management, tax shelters, or protection from creditors. A trust is a legal vehicle, where a grantor puts assets or money aside, and the person who will receive it later is called the beneficiary. A third person known as the trustee is in charge of managing the assets.   The most important point to notice about trusts in a divorce is the language used in the trust document. You need an attorney to look at this language, which can be very specific or pretty broad. The type of trust and how it is worded for the beneficiary are really important. A well-worded trust explicitly states that the money in the trust is only for the beneficiary. It can prevent a spouse from getting part of the trust.   Even though you and your spouse may have benefited from the trust during marriage, it doesn’t mean that you will benefit from it or use it during the divorce settlement. In some states, income from a trust is also calculated and used to offset or add to spousal or child support. A good financial team will greatly help you understand how things work in your state.   Key Learning Points: Trust is a legal vehicle, where a grantor puts assets or money aside, and the person who will receive it later is called the beneficiary. Trusts can be used for such things as gifting, asset management, tax shelters, or protection from creditors. The most important thing to notice regarding trusts in a divorce is the language used in the document. A well-worded trust explicitly states that the money in the trust is only for the beneficiary. Since the beneficiary doesn’t usually own the trust, it’s even more difficult for the other spouse to benefit from it during divorce.   Thank you for listening to the Divorce and Your Money Show. We hope the show helps you through one of the most difficult periods of your life. Shawn Leamon is also author of Divorce and Your Money: The No-Nonsense Guide. One-on-one divorce coaching services are available at www.divorceandyourmoney.com.   If you enjoyed the show, please take a moment to leave a review on iTunes, as it will help other people discover this free advice….(read more)

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When going through a divorce, there are many factors to consider, such as property division, child custody, and alimony. One aspect that may not be immediately apparent is how having a trust can affect the divorce process.

A trust is a legal entity created to hold, manage, and distribute assets for the benefit of named beneficiaries. Trusts can have significant financial benefits, such as minimizing estate taxes and avoiding probate. However, when it comes to a divorce, trusts can complicate matters.

If one or both spouses have a trust, it’s important to understand how it will be treated during the divorce. In many cases, a trust will be considered a marital asset, meaning it is subject to division between the spouses. This is especially true if the trust was created during the marriage or if marital assets were used to fund the trust.

However, there are some exceptions to this rule. If the trust is irrevocable, meaning it cannot be changed or revoked by the person who created it, it may be considered separate property and not subject to division in a divorce. Additionally, if the trust is solely for the benefit of one spouse and was created before the marriage, it may also be considered separate property.

In some cases, a trust can also be used as a way to hide assets during a divorce. If a spouse suspects that their partner has a trust that they have not disclosed, they may need to hire an attorney or private investigator to uncover any hidden assets.

Another potential issue with trusts during a divorce is that they can impact spousal support or alimony. In some cases, a trust may provide enough income or assets to the dependent spouse that they no longer need financial support from their ex-partner. This can be a complicating factor in negotiations for spousal support.

When considering a divorce, it’s important to understand how any trusts may impact the division of assets. An experienced divorce attorney can help navigate the complexities of trust law and ensure that all assets are accounted for in the divorce settlement.

In conclusion, having a trust can complicate the divorce process, and it’s essential to understand how it will be treated during property division. It’s always best to consult with a trusted attorney to ensure that all assets are accounted for and that the settlement agreement is fair and equitable for both parties.