Skilled Miami Lawyers Manage Issues Related to Trusts in Divorce

Knowledgeable attorneys work to ensure your property rights

At Rafool, PLLC, in Miami, our divorce attorneys have handled many high-net-worth divorces. Many individuals and couples set up trusts as part of their estate plans. But what happens to those trusts if the couple divorces? Does Florida law treat a trust as a marital asset or as separate property? If the purpose of the trust was to shield assets from creditors, can the trust also shield a party from support obligations? The answers to these questions depend on many factors, including when the trust was created, by whom and for what reason. We are well-acquainted with estate planning strategies and their effect on equitable distribution and alimony decisions. We take meticulous care to ensure that your rights are protected when a trust is at issue during or after your divorce.

How Florida treats different kinds of trusts in a divorce

The first question is whether a trust is a marital asset subject to equitable distribution. The answer depends on when the trust was formed and by whom:

  • Grantor-settled trust — If your spouse is the beneficiary of a trust someone else has established, the assets belong to the trust and are not subject to equitable distribution. But, income from that trust during the marriage can be considered marital property, unless the spouse takes care not to commingle that income with other marital assets. However, lines do get blurred, and some courts are willing to consider that one spouse’s income from the trust justifies an offset and may grant more marital property to the other spouse.
  • Revocable trust — A revocable trust your spouse sets up is generally considered marital property unless only separate funds were used to endow it. A trust established by both spouses is marital property. Furthermore, with a revocable trust, the grantor retains control over the assets. Since the grantor would be a party to the divorce action, a court can order the trust to be dissolved and the assets to be distributed.
  • Irrevocable trust — An irrevocable trust, such as a Domestic Asset Protection Trust, is not a marital asset subject to distribution. In one noteworthy case, Nelson v. Nelson, 2016 Fla. App. LEXIS 18470 (2nd DCA December 16, 2016), a husband placed the family home in an irrevocable trust with his wife as beneficiary to shield the home from his creditors. When the couple divorced, the husband asked the court to treat the home as a marital asset for equitable distribution, but the court found that it had no jurisdiction over the trust.

If you are getting a divorce in the Miami area, we can help you understand how these points of Florida law affect a trust:

  • Revocable trust after divorce — Unless the trust document or the judgment of the divorce court expressly states otherwise, a spouse has no rights in a revocable trust after divorce. According to 736.1105 of the Florida Statutes, if a husband or wife as settlor executes a revocable trust prior to divorce, any provision that affects the spouse becomes void and the trust is administered as if the settlor’s spouse had died on the date of the divorce. So, if a spouse does not act to enforce rights to trust assets during the divorce, those rights are lost forever.
  • Irrevocable trust after divorce — The Florida legislature has not enacted an equivalent law voiding provisions that affect a settlor’s spouse in an irrevocable trust following a divorce.

Finally, it’s worth noting that parties have tried to defeat support obligations, such as alimony payments, by placing assets in an irrevocable trust after the divorce is finalized. This is a complex situation, because the court cannot pierce the irrevocable trust to seize assets, especially when there is a spendthrift clause that limits disbursements. But, the court can garnish disbursements to satisfy unpaid support obligations. In other words, the court cannot enter the trust to take assets but can attach those assets as soon as they leave the trust and direct them to the recipient spouse to satisfy unpaid alimony.

Trusts add another level of complexity to divorce proceedings, which is another reason to choose an experienced and knowledgeable attorney to represent your interests.

Contact our Miami divorce lawyers for reliable treatment of trusts in divorce

The law governing trusts in divorce is complex, and any mistake can deprive you of your property rights. At Rafool, PLLC, we take meticulous care to ensure that you get the full benefit of the law in any property dispute. For immediate assistance, call us at (305) 567-9400 or contact our Miami office online to schedule an initial consultation.