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What Happens to a Living Trust When Someone Gets a Divorce?

Rebecca Spaulding
March 18, 2021
What Happens to a Living Trust When Someone Gets a Divorce?

Divorce is tough on everyone involved. It can also affect your plans with your trust. When going through a divorce, you may have to rearrange certain assets that were created in the trust either before or during your marriage.

Before we get started on what you can do to protect your assets, let’s clarify our understanding on what this is all about. 

How Does the Court Classify Trust Property?

You might have created a trust earlier with no intention of divorcing your partner any time soon. Unfortunately, sometimes reaching this point happens. In your living trust, there may be some property which your spouse can get because of the divorce. 

There are two types of property that courts classify: community property and separate property. Community proper includes everything you and your spouse bought together in the duration of the marriage, regardless of whose name it is under. Meanwhile, separate property includes any type of property you bought before the marriage. 

If your trust includes community property, then your partner has the rights to half of it. It’s best to ask a living trust attorney what property you should and should not put in your living trust. To better understand this, you should hire a lawyer especializing in living trust.

Revocable and Irrevocable Trusts

The extent of your spouse’s right in the living trust also depends upon whether you have a revocable trust or an irrevocable trust. In a revocable living trust you can name yourself as a beneficiary and have control over the assets. You can also make other modifications to it and have it dissolved at any point in time. This allows you to have proper asset protection in a divorce. You can consult Thomas Mc Kenzie Law firm on this kind of issues.

On the other hand, in an irrevocable living trust, you cannot make any modifications to it or name yourself a trustee or beneficiary once it has been established.

Impact of Trusts on Asset Separation

Even if your trust does not contain any community property, it will still affect your asset separation. The said property’s value may determine how much alimony or child support payments you have to pay. This also applies if your spouse earns less and does not have a lot of assets. 

However, suppose you decide to have mediations of your divorce and settle the separation of assets uncontestedly. In that case, that makes it much simpler as you don’t have to involve the court. You and your partner can decide the fate of the assets through the help of legal divorce mediation attorney.

What if No Changes Are Made?

If no changes are made to the living trust and you pass, the divorce settlement will probably cancel any distribution or gifts you may have given to your ex-spouse. Your former partner may only benefit when there is a clear indication or evidence that you left for them to benefit. 

Conclusion

Remember to consult a lawyer before you create a living trust to get proper insight on what property to include, among other important matters. For better asset protection, it is recommended that you create a recoverable living trust and make adjustments to it during a divorce. 

If you go for the alternate route, you may also want to consider a divorce mediation attorney. Regardless of the path you choose, having a professional in your corner means that you will make the most strategic moves.

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