How To Handle A Living Trust In A Divorce
If you’re getting a divorce, it’s important to know how your trust will be affected. There are many ways to handle a living trust in a divorce, and it’s important to consult with an experienced attorney.
What Is A Living Trust?
A living trust is a legal document that allows you to control and protect your assets throughout your lifetime and direct how they will be distributed upon your death. Typically, a living trust bypasses the time-consuming and costly probate process and facilitates the smooth transfer of property to beneficiaries. In most cases, the grantor (also known as the settlor or trustmaker) transfers ownership of property into a trust and names one or more beneficiaries. The trustee then manages the property on behalf of the beneficiaries. Depending on the terms of the trust, the grantor may also be able to reduce their taxable estate or prevent it from being taken into account when eligibility for government programs is concerned. It is important to consult with an attorney for assistance in creating a living trust.
Revocable Living Trusts And Irrevocable Trusts
There are two main types of trusts: revocable living trusts and irrevocable trusts. Both can be used for estate planning purposes and each offers its own benefits. For one thing, revocable living trusts are flexible and easy to update. Revocable living trusts can also avoid probate, which can save your heirs time and money during the process of passing property on to them. Irrevocable trusts are permanent. This means they cannot be modified or canceled after they are established. This can be a big issue in some cases, especially when you are trying to plan for divorce. If you are a spouse creating an irrevocable trust during your marriage using inherited separate property, it is important to note that the court will consider these assets marital property and subject to equitable distribution.
The Inheritance Of Property From A Trust
If you or your ex-spouse inherited property from a trust after the divorce, it is important to know how to handle this. This is because the assets in your trust might get divided in the same way as other assets during your divorce. If the property is a piece of real estate, it is important to remove your name and put it in the name of the trust. This will avoid your heirs from having to go through the court-supervised process of probate. Similarly, if you or your ex-spouse inherited funds from a life insurance policy or pension plan after the divorce, it is vital to update those designations. Otherwise, your former spouse could still inherit these funds, even if you have named someone else as an alternate beneficiary in the past.