What Happens to My Trust During a Divorce?

If you have recently been divorced, you may have several doubts. Besides going separate ways with your partner, various financial aspects play a vital role. Often, people are confused about what will happen to their trust following a divorce. You should first speak to a family law attorney in Wisconsin to get legal information about the division of your assets and other post-divorce matters. 

Shared property and Separate property

In states that follow the concept of community property, all the assets and debts accumulated during the active marriage period are considered jointly held by the couple. Regardless of who obtained the asset, it will come under shared property if received while the couple was married. After divorce, the marital property is fairly distributed among the ex-couple. Fair distribution does not necessarily mean equal or 50/50 division of assets between both parties.

On the other hand, separate property refers to the assets obtained before the marriage or marriage as gifts or inheritance. It also includes compensation recovery after sustaining a personal injury during the marriage. This property is not subject to division during divorce.

A lot of couples also have assets that are termed mixed property or mixed character property. These assets consist of both separate as well as marital assets. It includes funds that were obtained before the marriage as well as during the marriage. It will be subjected to distribution during the divorce process.

Trust and its distribution

To distribute the trust, it is essential to determine if it is under marital asset or separate property. In some cases, it may also be under the mixed property. The time of trust establishment and the source of funds are considered to decide the division outcome. The terms and beneficiaries of the trust are also checked to determine how it will be dealt with. The court will assess how the funds or income from the trust was used when the couple was still together.

There are various kinds of trusts; some of the most commonly seen types are as follows:

  • Revocable trusts
  • Irrevocable trusts
  • Spendthrift trusts
  • Special needs trusts
  • Charitable trusts

If a trust comes under marital assets, the court may order the dissolving of the trust. The funds in it will be divided between the couple.

Trusts & Prenups

Sometimes, a spouse may choose to protect the trust by adding it to the prenuptial agreement. The prenup created before the marriage determines how it will be dealt with after the split. Both spouses must sign the prenup, which should be legalized to be effective.