Can a Trust Protect My Assets in Divorce?
Trusts are valuable planning tools that can help guard your assets from creditors. In some cases, they can also protect the assets from division during the divorce process. Whether a trust can protect assets during divorce largely depends on the timing of when the trust is established and its terms.
The timing of establishing your trust
For a trust to protect assets from divorce, it must be established before the marriage. New Jersey caselaw has held that when a trust is established after marriage and one spouse intentionally dissipates the assets, this is a fraud on the marital rights of the other spouse. If a trust is established prior to the marriage, the assets are usually considered separate property as long as marital funds are not comingled with the separate funds.
The terms of your trust matter
The trust terms will also dictate whether a divorcing spouse will have the right to reach trust funds. The trust must be worded in a specific way that states that the grantor of the trust cannot demand distribution of assets. Having your trust clearly written is critical to obtaining the objective of protecting trust assets from divorce or other creditor claims.
Careful planning is paramount in drafting a trust. It is important to carefully consider your goals and worst-case scenarios so that you can properly protect your assets. An experienced lawyer from Lomurro law can carefully word the terms of your trust to ensure your assets are protected.
A domestic asset protection trust can provide the protection you need
One type of trust that can help you protect your assets in case of divorce is a domestic asset protection trust (DAPT). This is a self-settled trust that is established for the purpose of transferring assets owned by the grantor into a separate entity so that they are out of the reach of creditors. This type of trust typically names a third-party trustee who has the discretion and independent power to make distributions to the beneficiaries. This protects the trust funds from creditor claims.
A spouse can move premarital assets into a DAPT before marriage to prevent them from becoming part of the marital estate. This property is exempt from equitable distribution because they are separated from marital assets.
Contact an experienced Freehold family law attorney for divorce planning and guidance
Trusts are complex financial tools that can help protect your assets, but only if worded correctly. At Lomurro Law, our Freehold divorce lawyers have the knowledge and legal savvy you need to protect your financial future. Contact us today at 732-414-0300 or fill out the online contact form to schedule a confidential consultation.