Trusts in Divorce: What You Need to Know
The division of assets in a divorce can be a complex and contentious process, especially when it comes to trusts. The treatment of trusts in divorce proceedings has been a subject of debate and legal scrutiny. This blog post will explore the current state of the law regarding trusts and whether they get divided in divorce.
Trusts and Divorce in Massachusetts
In Massachusetts, the division of assets in a divorce is governed by the principle of equitable distribution, which means that assets are divided fairly, but not necessarily equally, between the spouses. Trusts can be a significant part of a couple's assets, and their treatment in a divorce can have a substantial impact on the financial outcome for both parties.
Types of Trusts and Their Treatment in Divorce
There are two main types of trusts: revocable and irrevocable. Revocable trusts can be changed or terminated by the person who created the trust, while irrevocable trusts cannot be changed once they are established.
Whether an interest in a trust is subject to division in a divorce depends on several factors. Here are some key considerations:
Timing: The timing of when the trust was established and when the divorce proceedings occur can impact whether the beneficial interest is divisible.
Terms of the Trust: The specific terms of the trust can play a role in determining whether the beneficial interest is subject to division. For example, some trusts may have provisions that protect the assets from being divided in a divorce, while others may not.
Nature of the Beneficial Interest: The nature of the beneficial interest in the trust is also important. Different types of trusts, such as spendthrift/discretionary trusts, may have different rules regarding the division of assets in a divorce.
Settlor's Intent: Massachusetts courts may consider the intent of the person who created the trust (the settlor) when determining if trust assets are subject to division in a divorce. If the trust was primarily intended to provide support for specific beneficiaries, such as the children of the settlor, the court may be less likely to divide the assets
That said, even if a trust is not considered a divisible asset, it can still be taken into account when determining the equitable distribution of other marital assets. For example, if one spouse has a significant interest in a trust, a judge may decide to award a larger share of the marital assets to the other spouse to offset the trust assets.
Protecting Trust Assets in Divorce
For those who wish to protect trust assets in the event of a divorce, it is essential to carefully consider the terms of the trust. One way to protect trust assets is to allow the trustees to make distributions to beneficiaries at their sole discretion, rather than directing them to make distributions under an ascertainable standard. This can help ensure that the trust assets are not considered divisible in a divorce.
The treatment of trusts in divorce proceedings can be complex and depends on the specific circumstances of each case. Trusts funded by a spouse's parents add an extra layer of complexity to the situation. It is essential for individuals with trust interests to consult with an experienced family law attorney to ensure that their assets are protected in the event of a divorce.
Disclaimer: The content provided in this blog is for informational and educational purposes only. It should not be construed as legal advice and readers should not act upon any information provided without seeking professional legal counsel. The author does not guarantee the completeness or accuracy of the information provided. This blog is not intended to create an attorney-client relationship between the author and the reader.