Can My Trust Be Divided During my Divorce?

If you are the beneficiary of a Trust, you may be wondering if the Court can divide the assets in the Trust. The answer is “maybe.” This article will cover the circumstances under which a Trust can be considered marital property. Courts in Colorado can only divide marital property. The first step is to determine whether your Trust is considered “property.”

Discretionary Trusts:

When a beneficiary is only entitled to receive distributions at the discretion of the Trustee, the Trust assets are not considered property.

Withdrawal Power:

Sometimes a beneficiary is given the right to withdraw $5,000 or five percent of the Trust’s value on an annual basis. This discretionary power is not considered property.

Revocable Trusts:

If one of the spouses created a revocable trust, the Trust assets will be considered separate property, unless the assets were separate property before they went into the Trust.

Right to Income:

Some Trusts require that a beneficiary receive distributions of income earned from the Trust assets. In these cases, a closer look at the terms of the Trust are required to determine if it is considered property.

If the Trust is considered “property,” then the beneficiary’s interest (not necessarily all of the Trust assets) must be valued.

Even if the Trust is not considered property, it can still be an “economic circumstance” that the judge considered when dividing property and determining maintenance and child support.

Dealing with Trusts during a divorce is complicated. If you or your spouse is a beneficiary of a Trust, you need to consult with an experienced family-law attorney to learn more about how your specific Trust may be valued during a divorce in Colorado.