What Happens to Our Trusts When We Divorce?

The Impact of Property Division on Estate Planning

It is not uncommon for people to utilize trusts to preserve their wealth and safeguard their assets for future generations. However, what happens to these trusts when a couple divorces? Just as with any divorce process, the couple’s marital assets are subject to property division. However, when assets are placed in a trust, property division can be more difficult and confusing. Trusts can affect how assets are categorized and impact a judge’s decision when allocating property to each spouse.

Common trusts that may be impacted by a divorce include:

  • Discretionary trusts
  • Grantor-settled trusts
  • Irrevocable trusts
  • Revocable trusts
  • Spendthrift trusts

The first step in property division is determining which assets are marital and which are non-marital. At a basic level, non-marital assets are acquired before marriage, while marital assets are acquired after marriage. For example, suppose a husband and wife purchase a house after they are married. In that case, it is generally considered a marital asset, and any equity accrued during the marriage is also a marital asset. This will need to be equitably divided during a divorce.

Florida is an equitable distribution state. This means that when a judge is dividing marital property, their goal is to distribute it equally between both parties. However, equitable distribution does not guarantee a 50/50 split of marital property. In some situations, there may be grounds for a judge to divide assets unequally while still maintaining a fair distribution. If one spouse is the beneficiary of an irrevocable trust or other substantial non-marital assets, this may impact how a judge views the division of property for that case.

Click here to read more about Florida’s equitable distribution rules.

Irrevocable Trusts & Property Division

Once marital assets are transferred into an irrevocable trust, they are generally no longer considered marital assets. Therefore, if property or money is placed in an irrevocable trust naming only one spouse as the beneficiary, that property will not be subject to property division during a divorce. An example of this is when someone purchases a house and places the house in a trust to benefit the other spouse alone. Typically, the courts do not have the authority to dissolve or distribute irrevocable trust funds during the property division process.

It is important to remember that there are some exceptions to this general rule, such as when trust assets and marital assets are comingled. Additionally, some types of trusts are subject to property division depending on when and how they were set up. Do not assume that just because you have an irrevocable trust in place, it will be safeguarded from your divorce.

Trusts & Alimony

Though irrevocable trusts often protect trust funds from creditors, they may be subject to alimony claims, per Florida Statute 736.0503. When the courts mandate alimony, the order is legally binding. When someone withholds court-ordered spousal maintenance, they may be subject to garnishment. There are certain types of trusts, such as spendthrift trusts, which can be garnished for unpaid spousal support.

Speak with a Lawyer for Peace of Mind

The Florida Trust Code (FTC) is complicated, and the laws surrounding trusts and divorce matters can be incredibly confusing. Furthermore, because every family is different and trust documents can vary widely, there is no single answer for how a divorce might impact existing trusts. If you are concerned about how your trusts will be affected by your divorce, you need to speak with a qualified lawyer, like ours at The Virga Law Firm, P.A.

We know that dealing with a divorce is difficult, and you may be concerned about preserving your assets, inheritance, and other property. Our attorneys are experienced and prepared to help you navigate your situation. With a thorough understanding of Florida’s property division and trust laws, we are qualified to handle even the most complicated cases.

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