Separating couples must deal with a number of emotionally charged issues, not the least among which is the division of marital property and debt. One common fear experienced by parties to a divorce is the belief that the other side is going to "take everything," a fear that may not always be justified. While a family court can distribute many kinds of assets, a party's separate trust fund is not one of them.
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Equitable Distribution and Community Property
All states divide marital property and debt under the laws of either equitable distribution or community property. Community property states, which constitute the minority, seek an equal division of the marital estate. Equitable distribution states, on the other hand, seek a division that is equitable, or fair. Fair and equal are not always the same thing, and so ED states allow for an unequal distribution in the presence of certain statutory factors. A party's separate trust fund can constitute a "distributive factor" justifying an unequal division in favour of the other side, but the court cannot distribute the trust benefits.
What Constitutes Separate Property
Both ED and community property courts can only divide marital property. Separate property consists of all property which a party owned prior to date of marriage, property earned after date of separation -- or another date specified by state law -- and property acquired by either party through gift or inheritance during the marriage. A trust fund itself is not actually the property of the beneficiary to begin with, as legal title rests in the trustee. Only equitable title, or the right to enjoy the trusts's benefits, lies in the beneficiary. Unless the beneficiary set up the trust herself using marital property, the other side will have no claim to it.
Your Trust Fund and Alimony
Although the other side has no claim to share in trust benefits directly, courts will consider trust income in alimony cases. A party who receives trust benefits may not qualify as a dependent spouse in the analysis of need versus income; if she is still dependent, she will be less so to the extent of her trust income. A party who may be a dependent spouse without the trust income may qualify as a supporting spouse with it, especially if the parties used trust income to subsidise their standard of living during the marriage.
Your Trust Fund and Child Support
Just as a court will consider trust income in an alimony case, it will also consider it in child support. Trust income will be added to a party's monthly earnings to derive a new income for child support purposes. As such, if the trust beneficiary is also the custodial parent of the parties' children, the other parent will not have to pay her as much child support as she would otherwise receive. If she is the one paying child support, the trust income will cause her to pay a higher amount.
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- Forbes: Divorce: Trust Fund Feuds: Marlene M. Brown: December, 2006
- International Family Law: Trust Funds and Divorce: Jeremy D. Morley: April, 2006
- LegalZoom: Comparing Equitable Distribution and Community Property for a Divorce
- Divorcenet: Determining an Equitable Distribution of Community Property