What Happens to the Money in a Trust When Someone Associated with the Trust Gets a Divorce?
Divorce is one of the most formidable foes of long-term planning, especially when it comes to finances. Most couples get married with the intention of combining their wealth and jointly passing it on to their descendants. If you and your spouse have delved deeply enough into estate planning to have set up a revocable trust and placed assets into it, it would probably come as a major shock if your spouse suddenly asked you for a divorce. Setting up a revocable trust is a way of hoping for the best but preparing for the worst. If you have a revocable trust and you or someone in your family is going through a divorce, a Florida estate planning lawyer can answer your questions and help you make the best financial decisions when moving on from the divorce.
Revocable Trusts and Division of Property
If you have transferred some of your assets to a revocable trust, Florida law treats them as though they still belong to you. Therefore, when a judge in a divorce case decides how to divide the couple’s assets, the most important question is which assets are marital property, which can be divided, and which ones are nonmarital property, which belongs to only one spouse. In general, assets that you owned before you were married are nonmarital property, but any money you earn, property you buy, or investments you make during the marriage are marital property. Inherited money is nonmarital property. Therefore, if some of the money in your revocable trust is nonmarital property, the court can require you to pay some of it to your spouse.
If you have received money from a revocable trust set up by someone else, it is nonmarital property, and the court cannot make you share it with your ex-spouse. It does, however, count when a judge is determining how much money you have and how much your ex has, in order to decide the amount of spousal support or child support payments.
Can Revocable Trusts Help You Support Your Divorced Son or Daughter?
Divorce is a major financial setback for almost everyone, regardless of their financial situation during their marriage. Many recently divorced people turn to their parents for financial help. If you have named your son or daughter as a beneficiary of a revocable trust, the money they receive from the trust, whether during your lifetime or after your death, is nonmarital property, at least it is when they first receive it. If your child deposits the money into a joint bank account they share with their spouse, or if your married son or daughter uses the money to buy a house, it becomes marital property. An estate planning lawyer can help you decide how best to make the money from your revocable trust protect your child from financial sabotage by an ex-spouse.
Let Us Help You Today
Revocable trusts are a good way to protect your assets, but divorce can make it necessary to change some of your plans. An estate planning lawyer can help you decide if and how to modify your estate plan if you or one of your children gets divorced. Contact Clearwater estate planning attorney William Rambaum to discuss your questions.