It depends on a case-by-case basis. Kentucky courts divide marital assets equitably. This means that the court divides assets like homes, savings accounts and retirement funds among both parties based on factors such as each spouse’s financial situation and contributions to the marriage.
So, what happens to the family trust? It depends on whether the court considers it marital or separate property. Several key factors can influence this decision.
When was the trust created?
The timing of a trust’s creation plays a crucial role. Courts often view trusts established before marriage as separate property, which can protect these assets from division. However, people who create trusts during their marriage may find that courts consider these trusts as marital property.
Who funded the trust?
If the grantor – the one who created the trust – uses marital funds to create or contribute to a trust, a court may consider some or all of it as marital property. However, if one spouse uses separate funds, such as an inheritance or pre-marital savings, to fund the trust, courts are more likely to classify it as separate property. This classification can protect the trust from division in a divorce.
Is the trust revocable or irrevocable?
A revocable trust allows a grantor to modify or terminate it, letting them maintain control over the assets. Since assets in a revocable trust are still under the grantor’s control, courts may consider them marital property.
With an irrevocable trust, however, a grantor effectively relinquishes control over the assets. This loss of control occurs because once they create the trust, the grantor typically cannot change its terms or reclaim the assets without the beneficiaries’ consent or court approval. Courts may then classify assets in an irrevocable trust as separate property.
Who are the beneficiaries?
Family trusts typically name both spouses and often their children as beneficiaries. A court may consider a trust as marital property if it names both spouses as equal beneficiaries. However, if the trust primarily benefits the children, with the spouses as secondary beneficiaries or trustees, the court might prefer to keep the trust intact for the children’s sake. Ultimately, the court will examine the trust’s purpose and the grantor’s intent.
Don’t leave your future to chance
Divorce can be difficult, especially when trusts are part of the equation. If you’re unsure how your divorce might affect your family trust, then seeking legal advice may be crucial.
