Are Trusts Subject To Property Division?

On Behalf of | Oct 19, 2018 | Trusts

Trusts are complex fiduciary mechanisms designed to protect and preserve assets. Some people believe that assets held in a trust are protected in a divorce. However, depending on a variety of factors, those assets may still be subject to property division. 

Issues to consider in relation to trusts and property division

An article from Barron’s addresses a few of the issues that may need to be considered in relation to trusts and property division. First, the trust must be properly drafted to provide the necessary asset protections, and assets must have been correctly transferred to the trust. A poorly drafted trust may not provide the expected protections.

The article brings up the issue of marital versus separate property. If the trust is drafted in a manner that prevents it from being deemed as or commingled with marital assets, and does not provide a beneficiary with a right to the distribution of income or assets, it may be outside the marital estate and not subject to consideration by a judge in fashioning financial orders. However, Connecticut is an equitable division state that provides judges with discretion to achieve a division of assets that is fair and equitable. Unlike the law in community property states, Connecticut statutes do not distinguish between marital property and separate property.

The article mentions that another important issue to consider is whether the spouse who is the beneficiary of the spouse actually has access to the assets in the trust. If the beneficiary cannot control the assets from the trust, those assets may not be considered the beneficiary’s assets and thus may be protected from property division.

The article points out that, even if the assets are protected within the trust, they may play a role in property division. The argument may be made that to achieve an equitable division of assets, the spouse who is the beneficiary of the trust may receive a smaller percentage of marital assets while the other receives a greater share.

Ultimately, these matters represent an intersection between two complex and dramatically different areas of the law, family law and trust law, making the need for skilled and sophisticated legal representation that much more important. Individuals who are concerned about the disposition of a trust in a divorce should turn to an experienced attorney for guidance.

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