All trusts do not provide the same level of protection, especially when divorce enters the picture. Planners should reinforce to clients that trusts differ and go through their needs and then match an appropriate trust mechanism to them. Most parents want to set up trusts for their children that end when the child is mature enough to handle the money and that allow for distributions to the child that will maintain his/her standard of living. The safest approach is to have a trust designated as a discretionary trust with no standard for distribution. If you state a support standard, courts could interpret the standard as including the payment of a certain matrimonial obligation. Planners should be sure to stress to clients that divorce can threaten wealth transfers and then help them plan to avoid that threat. While discretionary trusts give a large portion of discretion to trustees, they do provide stronger protection against divorce.
See Martin Shenkman, Trust, But Verify, financialplannning.com, Feb. 1. 2012.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
