A Guide to Using a Trust To Protect Assets From Divorce
Setting up a trust to protect assets from divorce is a potential estate planning option for high-earning individuals. Find out more here.
Protecting Assets With a Trust in the Event of Your Divorce
It is unfortunate that most marriages don’t always last, but if you get a trust to protect your assets from divorce, it may increase peace of mind.
Although you don’t intend to get divorced when you originally marry, the future is unknown, and you still should take measures to ensure your money and properties don’t fall into the hands of another.
Typically, any assets you owned before your marriage are considered separate rather than marital properties. Unfortunately, assets are often combined, such as in a joint bank account.
Suppose you keep your finances and other properties you brought into the relationship in a trust. In that case, they are more protected and, therefore, less likely to be divided during a marital dissolution.
Estate planning lawyers can help you determine whether a trust is right for you and draft one that is most likely to preserve your assets successfully.
How Marital Assets Are Categorized: Marital Property vs. Separate Property
Divorce proceedings are different from state to state. Where some states are considered community property states meaning that all assets are included, whether accumulated during the marriage or previously acquired, Colorado is an equitable distribution state.
Under Colorado Revised Statute Section 14-10-113, each party retains the property they entered the union with, and the marital assets are divided fairly.
Creating a trust offers many benefits. Not only does it protect your assets, but it also maintains assets designed to be passed to your child and helps your family avoid probate upon your death. Ultimately, it enables you to control how your money and properties are distributed.
Estate law covers trusts, and the right estate lawyer may be able to help you separate assets and protect your interests.
Are Assets in a Trust Protected From Divorce?
As the separation proceeds, you may wonder, “Are assets in a trust protected from divorce?” The short answer is, “yes.”
Previously owned property of the divorcing spouse is considered separate property during divorce proceedings. Marital property is generally distributed “equitably.” This is not, however, an exact science. A trust protects assets from divorce by removing them from “marital property” and placing them in the trust.
Estate planning lawyers have access to the financial information of their clients, which makes choosing a reputable law firm that you trust is imperative. A qualified attorney should offer essential details about their strategy and resources.
How Does Trust Protect Assets From Divorce?
Many are unsure how a trust protects assets from divorce. It depends on your specific circumstances. The primary consideration is whether you are married when you seek a trust.
If you have assets that you want to protect and you are not already married, you can have your estate placed in a living trust, also referred to as a revocable trust.
With this type of trust, you will be the creator, trustee or manager, and the beneficiary. You should also name an heir to take over the trust upon your death. All assets in the trust are not considered marital property. Instead, they remain separate property.
If you are married and seek a revocable trust, it is designed to protect your assets from divorce only if the marriage fails. The spouse who does not have an ownership stake in the revocable trust has no legal claim or right to its contents.
Speaking with an estate planning lawyer about revocable trusts is an essential first step. It can be completed in under an hour when you are ready to create a revocable trust.
How to Protect Trust Assets in Divorce Proceedings If You’re Already Married
You can still create a trust to protect your assets if you are already married. This is usually done with a Domestic Asset Protection Trust (DAPT)—an irrevocable trust. Once this type of trust is created, it can’t be canceled, and the creator has no claim to the assets.
If you are revising an existing revocable trust, it must be converted to an irrevocable trust.
The main benefit of irrevocable trusts is that the spouse who holds legal title to the assets within the trust has no ownership rights or claim to its contents. The other spouse can’t access or use any of these assets without the written consent of the person who controls the funds.
Whether revocable or irrevocable trust, an experienced estate planning attorney will be able to help you restructure your assets for maximum protection.
Choosing an Estate Lawyer for Protecting Assets
When you choose an estate lawyer to prepare a trust and protect your assets from divorce, you want one who prides themselves in developing an excellent attorney-client relationship and offering sound legal advice.
If you are in the market for an estate planning attorney, you should ask about their specialties to ensure they cover the services you require. A living trust in Colorado is different from the other types of trust. Therefore, you want to work with a law firm with experience in that type of trust.
How to Protect Your Assets From Divorce Using Trust
An experienced trust attorney can explain how to protect your assets from divorce using a trust. When you and your legal support are developing your estate plan, there are several things that you might want to consider, including potential child support, support of other family members, and tax advice.
There are several types of trusts that offer greater protection during a divorce action, such as:
- Irrevocable trusts
- Revocable trusts
- Self-settled trusts
Some of the aspects that the trust may cover are income earned, an investment account, a marital asset, property, and other assets held that are subject to division. Without a thorough plan, your divorce might suffer unintended consequences.
Hiring the right law firm could describe the main difference between the types of trusts available in divorce cases and help you avoid probate.
Can a Trust Protect Assets From Divorce?
Spouses may be unsure if they can use a trust to protect their assets from a divorce. Although it is not the only reason to have an attorney, it is one of the primary ways in which your property can be maintained upon the dissolution of your marriage.
This may be especially true when the divorce is not amicable, and one spouse chooses to make things difficult for the other spouse. Having a trust will constitute legal precedents that make the rest of the process go more smoothly, as everything is predetermined.
Why You Should Protect Your Assets From Divorce With Trust Strategies
In the event of a divorce, your legal representative will describe why you should protect your assets from divorce with a trust.
As a general rule, a qualified attorney will help protect the assets of the non-beneficiary spouse from the beneficiary’s creditors depending on the information contained in the facts that constitute a legal document during a separation.
Putting Your Assets in Trust Before Marriage to Protect From Divorce
If you want to secure your funds from a potential ex-spouse for your beneficiaries, putting your assets in a trust before marriage maybe your best option to protect them from divorce.
Since you will be discussing sensitive financial subjects with your trust’s lawyer, you want a legal counselor who is compassionate, knowledgeable, and thorough.
Contact legacy Law for a consultation to determine if they are the right firm to help you develop a trust to protect your assets in a divorce.
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