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How to insure third-party trusts against divorce division

Louisiana is a community property state. What that means is that, generally speaking, property accumulated during a marriage is considered equally owned by both spouses. If a couple divorces, that community property can most likely be expected to be divided by the spouses equally.

In light of that, the conclusion it would seem logical to draw is that any assets that the individual parties brought to the marriage should not be subject to property division in the event the marriage ends in divorce. However, the legal system can be complicated and there instances on record in which the lines related to marital and separate property have sometimes been found to be blurry.

This may prove to be of particular concern if you happen to be the beneficiary who brings a third-party trust into a marriage. It can be easy to assume that the assets in such a trust would be shielded from both creditors and claims from an ex-spouse. But to avoid assumption and to be sure that the shield is in place, it might be wise to make sure the trust documentation clearly states the intentions of the grantor.

Specifically, it may be a good idea to include language in the document declaring that the trust fund should never be considered marital property. For even more protection, some legal observers suggest it might be wise to name an independent trustee who would have full control over how assets are distributed.

If yet another level of security is desired, the trust fund can be identified as separate property within a prenuptial or postnuptial agreement.

Divorce, like marriage, is a major life event. As such, it deserves an equal level of planning and preparation. And an experienced attorney should always be consulted.

Source: Forbes, “What Divorcing Women Need To Know About Protecting Third-Party Trusts,” Jeff Landers, Oct. 8, 2015

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