Can I Protect a Trust Fund in a Divorce?
A divorce can make you worried about your assets. If you or your family has a trust fund in place, you may wonder how it will be affected. For example, will you have to split the assets with your spouse? Is there any way to protect what’s rightfully yours?
Family trusts are often complex. How a trust is split in a divorce depends on whether assets were mixed with marital assets. Here is a look at what a trust fund does and how you protect it in a divorce.
What is a Trust Fund?
A trust fund is an estate planning tool that contains property or assets and is distributed to beneficiaries upon the grantor’s death. Trust funds are often set up by parents or grandparents for their children or grandchildren. Trust funds, also known as trusts, can hold a variety of assets such as money, property, stocks, bonds, and even a business. Trusts may have stipulations. For example, they may pay out when a beneficiary graduates college, gets married, has a child, or turns a certain age.
What Happens to Trust Assets?
Trusts can offer protection from divorce if set up appropriately before the marriage. To shield trust assets from a divorce, you can use specific provisions or discretionary trusts to give you greater control over distributions.
Barring this, the status of a trust’s assets will vary based on the following scenarios:
- Assets may be shielded from a division. If a trust was established prior to the marriage and was kept separate from marital assets, the assets may not be affected. The trust will continue to operate as it did before, with no changes.
- Classification as marital property. If a family trust was established during the marriage or if marital assets were used to fund the trust, it could be considered marital property. This means the assets could be subject to division in a divorce.
- Beneficiary changes. If a spouse is a beneficiary of the trust, the terms might be modified after a divorce to remove that spouse. However, this would depend on whether or not the trust allows for changes in beneficiaries.
- Hidden assets may be discovered. A spouse may use a trust to hide marital assets by transferring them into a trust. If they are discovered, the court can reclassify these assets as marital property and split them in a divorce.
- Mingling of trust assets. If assets from a trust are mixed with marital assets, the commingled assets might be considered marital property and subject to division in a divorce.
Contact Us Today
Divorce can affect assets and how they are distributed. A trust fund is no exception.
Filing for divorce? It does not have to be stressful or complicated. A Cherry Hill divorce attorney from Fiore Law can help you protect what matters most to you. To schedule a consultation with our office, give us a call at (856) 214-8964.