Does a Trust Protect Assets in a Divorce?

Divorce can be a complex and emotionally challenging process. Estate planning is no different. Planning your estate can be even more confusing if you have to consider the possibility of getting divorced. If you’re in this situation, you may be wondering how much protection a trust offers your assets during a divorce.

The Law Offices of Diron Rutty has vast knowledge and experience in estate planning and family law, making our firm well-equipped to handle this matter. If you need an estate plan in White Plains or the Bronx, New York that takes divorce into account, we can help.

Understanding Trust Protection in Divorce

A trust is an estate planning tool that holds assets for the benefit of a third party, the beneficiary. This being said, you can be the beneficiary of a trust you created, so you do not have to have someone else be your beneficiary. Regardless, trusts are managed by their denoted trustees, and they can stipulate how and when assets pass to beneficiaries.

Misconceptions About Trusts

In discussing asset protection during a divorce, it is essential to dispel some common misconceptions about trusts. Divorce proceedings do not completely shield assets in a trust.

The type of trust – revocable or irrevocable – plays a significant role in determining whether assets can be considered marital property and thus subject to division. Moreover, the timing of the trust’s creation and the source of the assets can also influence its protection in a divorce.

Types of Trusts

• Revocable Trusts: Often known as living trusts, revocable trusts can be altered or terminated by the grantor during their lifetime. These are popular due to their flexibility but provide limited asset protection in divorces.
• Irrevocable Trusts: These are fixed and can’t be easily changed once they’re established. Because the grantor relinquishes control over the assets in the trust, they offer stronger protection in divorce cases.
• Discretionary Trusts: The trustee has discretion over the distribution of assets, providing a layer of protection since the beneficiary doesn’t have direct control over the trust assets.

Asset Protection in Family Law Trusts

The primary rule of thumb is that trusts can protect assets in a divorce, but this greatly depends on numerous factors such as:

• Type of trust: Irrevocable trusts generally offer better protection than revocable ones.
• Timing of trust creation: Trusts established before marriage are typically seen as separate property.
• Origin of assets: Assets acquired during the marriage versus those that were inherited.

Legal challenges often arise in divorce cases, especially if there’s suspicion of a trust being used to shield assets.

Other Considerations for Your Protected Assets

Pre-nuptial and post-nuptial agreements can dictate how assets are handled in a divorce, potentially outweighing the trust’s terms. It may even make placing certain assets in trusts a violation of your marriage contract.

Co-mingling of assets – combining separate and marital assets – can jeopardize trust protection. This can potentially render the trust’s assets divisible in divorce.

Fraudulent transfers, where assets are moved into a trust to hide them during divorce proceedings, can be contested and reversed by the court.

Contact the Estate Planning and Family Law Attorneys at The Law Offices of Diron Rutty, LLC for Help

If you’re navigating a divorce or wish to secure your assets through estate planning, legal help is paramount. At The Law Offices of Diron Rutty, LLC, we combine our experience in estate planning with our nuanced understanding of family law to offer comprehensive legal assistance.

Don’t leave your assets to chance. Contact us today to craft an estate plan that aligns with your life circumstances and goals. Schedule your consultation by calling or visiting our website. Protect your legacy with trusted professionals by your side.