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One of the most important matters you’ll address during your divorce is property and asset distribution. If you have a trust fund, you may wonder what happens to the trust and whether the assets in your trust are available for division.
When you’re dealing with a divorce and have one or more trusts, you want to ensure you have a skilled divorce attorney handling your case. Consult with a New York divorce lawyer right away to ensure your trust is protected.
What is a trust fund?
A trust is a legal relationship established between the grantor (the person funding the trust), the trustee (the person in charge of trust funds), and the beneficiary (the party benefiting from the trust. Trusts are used for several reasons, depending on the type of trust, but are often used to safeguard assets and help avoid probate at death.
There are numerous types of trusts, depending on the grantor’s intentions. However, two of the most common types of trusts are revocable and irrevocable trusts. In a revocable trust, you’re entitled to make changes or withdraw at any time. On the other hand, the terms of an irrevocable trust cannot be altered.
Irrevocable trusts are most frequently used when creating a trust to protect assets for a potential future divorce. Because the terms are set in stone, it can efficiently safeguard your assets.
Trust funds: Separate or marital property?
It’s important to understand property division laws and how they play into trusts. New York operates under equitable distribution laws. This means that marital property (and not separate property) is divided fairly between spouses.
Marital property is property acquired during the marriage. Separate property usually involves property each spouse came into the marriage with, but it could also include gifts and inheritances, even if received during the marriage.
You may wonder whether the law views trusts as separate or marital property. In most cases, a trust is considered separate property, especially if it is created before the marriage and funded with a spouse’s funds. When this is the case, trusts remain separate property and are not distributed in a divorce.
Although, even if trusts are funded with marital property, they would not likely be considered marital property, since the trust holds assets for the benefit of another.
However, under some circumstances, a trust could be deemed marital property if the trust is funded with marital property and it is a revocable trust. In this situation, the trust would likely be available for distribution.
Irrevocable trusts are not deemed marital property in New York. Still, if an irrevocable property exists, a judge may consider this when dividing marital assets.
Protecting Your Trust Fund During a Divorce
Taking certain steps to protect your trust is key if you and your spouse end up divorcing. When attempting to safeguard your trust fund during a divorce, you should:
- Avoid Commingling Funds: Keep your trust fund completely separate from marital money, and avoid funding it with shared funds or financial assets
- Set the Proper Terms: Ensure the terms of your trust protect your trust funds by creating a revocable trust or including certain wording
If you’re unsure about your trust and worry about the level of protection it can offer you in the event of a divorce, speak with a lawyer. An attorney can provide quality insight and assistance.
An Experienced Divorce Attorney Can Help You Protect Your Trust Fund
If you’re looking to end your marriage and have a trust, consult with a seasoned lawyer to protect your trust fund during a divorce. The attorneys at Aiello & DiFalco, located in Garden City, NY, are ready to assist you with your case. Contact our firm today to schedule a consultation, and let’s discuss how we can help you.