When a couple gets divorced, marital property is equitably distributed between them. However, as a Florida case illustrates, that is not always the case when the assets are held in an irrevocable trust.
A man in Florida settled an irrevocable trust with his wife and children named as the beneficiaries. Assets were transferred into the trust including the couple’s home. They later decided to get divorced.
If the couple still owned the home outside of the trust, then it would have been used as part of an equitable property division between them. A Florida trial court determined that was also the case with the irrevocable trust and ordered that the trust’s terms be modified and the assets equitably divided.
The appellate court disagreed, however, and determined that the trust could not be modified and the assets divided in the divorce.
The Wills, Trusts & Estates Prof Blog discussed this case in “Equitable Distribution for a Couple’s Irrevocable Trust?”
The lesson is that sometimes estate planning techniques can become problems when circumstances change. One thing to think about when planning your estate are some of the things in your life that could possibly change, so you can make sure your estate plan can be adapted to them easily.
Another lesson to learn from this case is that when getting divorced, you need to get your estate planning attorney involved, since you will need to redo your estate plan in an appropriate way.
This case was in Florida. Since both trust and divorce law are matters for the individual states, the laws might be different in your state.
Seek the advice of a local attorney to learn what the law is in your state.
Reference: Wills, Trusts & Estates Prof Blog (Dec. 23, 2016) “Equitable Distribution for a Couple’s Irrevocable Trust?”