Does a Revocable Trust Protect Assets From Divorce?

Divorce can be a complicated legal process, and many wonder what it will mean for their financial future. Couples who have worked to create an estate plan just to start heading for divorce often have important questions about their revocable trusts.

One of the most common questions is if a trust can protect assets in the event of a divorce. Let’s discuss your revocable trust and divorce, some important considerations, and how a Cinnaminson trust lawyer can guide you.

What Is a Revocable Trust?

A revocable trust is a legal document created during an individual’s lifetime to manage their assets.

The creator of the trust, also known as the grantor, transfers ownership of property or assets to the trust, which is then managed by a trustee. Unlike an irrevocable trust, a revocable trust allows the grantor to maintain control over the trust assets and can make changes or revoke the trust anytime during their life.

What Happens to a Revocable Trust in a Divorce?

In the event of a divorce, the assets in a revocable trust are generally considered to be marital property, which means that they are subject to division between spouses.

However, the specific rules for treating a revocable trust in a divorce can vary depending on the state in which the divorce takes place.

Can a Revocable Trust Protect Assets From Divorce?

A revocable trust cannot protect assets completely in the event of a divorce. As mentioned above, the assets in a revocable trust are generally considered to be marital property and are subject to division in a divorce.

However, there are some situations where a revocable trust may provide some asset protection.

The Trust Predates the Marriage

One such situation is if the trust was created before marriage. Assets that are owned by a spouse before the marriage are generally considered to be separate property and are not subject to division in a divorce.

If a revocable trust was created before the marriage and the assets in the trust were acquired before the marriage, those assets may be considered separate property and may not be subject to division in a divorce.

The Trust Terms Address Divorce

Another situation in which a revocable trust may provide some level of protection is if the trust includes a provision that restricts the distribution of assets to the spouse in the event of a divorce. This type of provision is sometimes referred to as a “spendthrift” provision and can limit the ability of a spouse to access the assets in the trust.

Other Considerations for Revocable Trusts and Divorce

In addition to the considerations mentioned above, there are two other important factors regarding revocable trusts and divorce:

1. When the trust was created — If a revocable trust is created shortly before or during the marriage, it may be subject to scrutiny by the court. The court may view the creation of the trust as an attempt to hide assets from the other spouse and may consider the assets in the trust to be marital property subject to division in a divorce.
2. How the trust was funded — If the trust is not properly funded, meaning that assets are not transferred to the trust as required by the trust document, it may not provide the protection that the grantor intended. In the event of a divorce, assets not properly transferred to the trust may be considered marital property and subject to division in a divorce.

Seek Legal Guidance From an Experienced Cinnaminson Estate Planning Lawyer

Given the complexity of the laws regarding revocable trusts and divorce, it is important to seek legal advice if you are considering adding a revocable trust to your estate planning checklist. A qualified Cinnaminson estate planning attorney at The Simone Law Firm can help you understand your rights and obligations and can help you create a trust that meets your specific needs.

Contact us today and we’ll review your situation to determine the best course of action for your needs.