During the administration of a trust, the process is not always smooth sailing. Life events may take place that add wrinkles to the trust’s administration. One such example is where a beneficiary goes through a divorce and the ex-spouse tries to access the trust assets during the divorce proceedings. It is crucial that trustees understand how to deal with a beneficiary divorce if such a situation should arise. Because the rules surrounding trust administration and divorce are often complex, here are five helpful tips to help guide trustees.
5 Important Tips for Trustees Dealing With Divorce of Beneficiaries
- If you are not already working with an experienced attorney, it is important to do so when dealing with the divorce of a beneficiary. The former spouse may attempt to get at the assets in the trust that the beneficiary stands to inherit. It is generally your job as the trustee to try to protect these assets.
- You may be advised by your attorney to stop all disbursements during a beneficiary divorce proceeding. This depends on the terms of the trust. Most courts usually do not order the trustee of spendthrift, discretionary, or support trusts to make disbursements of trust funds. This includes the payment of spousal support.
- It is important to understand whether a trust asset has been legally transformed into community property. If it has not, it may not be accessible during the beneficiary divorce. Keep in mind that it is possible for assets to be turned into community property even if the assets were initially distributed out of a spendthrift, discretionary, or support trust.
- A family court judge could treat regular trust disbursements as income for the purposes of calculating spousal or child support.
- Please note that beneficiaries going through divorce proceedings may be called in order to negotiate a post nuptial or divorce agreement.
While it is true that courts have little authority to order distributions out of certain types of trusts during a beneficiary divorce, the law in this area is highly complicated. It is therefore critical to seek assistance from a knowledgeable and experienced attorney. We encourage you to contact us today at (888) 443-6590 for more information.