There are a number of factors that a person might want to consider during a divorce if one of the parties owns a trust. If the trust was established before the couple was married, then the assets of the trust are considered to be separate property in community property states. A partner might want to consider using a Domestic or Foreign Asset Protection Trust, which would allow that partner to transfer any separate property to a separate trust. A person might be able to forgo the determination of the classification of separate property and the appreciated value of that property because the trust would own the property and not the partner. In addition, the beneficiary of the trust might be able to exclude property that was placed in the trust in determining alimony. Furthermore, the settlor might want to draft the trust to protect the assets of the beneficiary regardless of whether a person is married or not. This last part refers to standard asset protection planning. Everyday people incur tort liability in auto accidents or other tragedies. If the beneficiary of a trust becomes liable for an accident, a good trust can protect the assets placed within the trust from his or her creditors.
See Can A Trust Protect My Assets in Divorce?, Bedrock Divorce Advisors, LLC, (2012). See also Jeff Landers, Can a Trust Protect My Assets in Divorce?, Forbes, July 18, 2012.
Special Thanks to Brian J. Cohan for bringing this article to my attention.
