Disclaimer: This article does not constitute legal advice. If you have any questions about your individual situation it is best to seek the advice of an experienced legal professional.
Trusts can be some of the most contentious and difficult assets to divide in a divorce. This is why a non-adversarial divorce mediation process is particularly suited to divorces with complex assets in which trusts play a major part.
To avoid “trust issues” in divorce, divorcing spouses should be transparent about their assets and make a thorough determination about what constitutes marital property.
It’s common for people to enter a marriage with a family trust that is separate from marital assets. Sometimes this money can become mingled with marital assets. Oftentimes married couples set up a trust to take care of their children or relatives. There also may be international or offshore trusts that are not subject to US property division rules.
Common “Trust Issues” to Watch Out For in Divorce
The trust was inherited property
One of the most common ways a trust features in divorce negotiations is if the trust is inherited property. Often this means that the trust is not considered marital property because it was kept entirely separate from the marital funds. In a lot of cases, however, income from a family trust could substantially fund the couple’s lifestyle, and therefore the trust income could be considered marital property. Family trusts differ in the amount of control a beneficiary has over the assets. This can also determine the extent to which the trust is considered marital property. Some couples may have a prenup which can specify whether inherited property should be kept separate from marital property.
The Assets Include International Trusts
During an international divorce there may be many foreign assets, such as offshore trusts. Sometimes people have offshore assets, even if they don’t spend time abroad or hail from outside the US. International trusts can offer asset protection benefits. In some cases these trusts may even specifically protect against divorce. In all cases, international trusts are much more complex to divide in an adversarial divorce because a US court cannot order these assets to be divided. The court can order an exchange of one marital asset for another, but the trusts are not under their jurisdiction. This is why it’s always better to avail of a non-adversarial divorce process when it comes to complex assets such as international trusts. These assets may or may not qualify as marital assets. A highly skilled divorce mediator can help you determine their status as marital assets or help you reach a compromise on how to distribute the assets during your divorce.
Some of the Trusts Were Set Up for College Expenses or to Benefit Children
Often couples set up trusts to benefit their minor children or specific trusts that are tailored to plan for college expenses.
The trust could also be set up to benefit the spouse on behalf of the children. When getting a divorce, one or both spouses may want to ensure that the assets in the trust goes to the children rather than to any potential future spouse. A highly qualified divorce mediator will help you weigh up your marital assets to ensure the decisions you make are in your children’s best interests.
Any trust income, even if it is not for the benefit of children, can be considered in child support determinations. A high level divorce mediator who works with couples with significant assets will help you to consider the property division in the light of any income that may be assessed for child support. This can influence what assets are divided and how much the divorcing spouses each receive. If the children are accustomed to a certain lifestyle and have expensive tuition fees, child support could be quite high, which can determine how the rest of the marital property is divided.
High Level Divorce Mediation for Divorces with Complex Assets
People who have significant assets or a business often have trusts to protect their business, to fund their lifestyles and to build security for the next generation. Divorce becomes more complicated when trusts enter the picture as funds in the trust are technically owned by the trust and separate from the marital property. There is an endless list of trusts that have different purposes. Each of these trusts have different tax implications, rules and regulations. The legal language governing trusts may also be very important in interpreting the role of the trust and whether it can be considered as marital property.
For complicated considerations like these, it’s best to work with experienced West Coast divorce mediation professionals who can resolve any questions over complicated financial assets. At Divorce Options San Diego, we do a thorough analysis of your separate and marital community property to reach a fair and amicable divorce settlement that is the first step towards your future. We often work with divorcing couples who have complex property with an international component. We have offices in San Diego, CA, Silicon Valley and Berkeley, CA. We can work with you remotely or in person depemding on convenience and preference. Please contact us to learn more about our West Coast divorce mediation services.
