Many families use trusts in order to protect assets and wealth throughout generations. With this tool, a trustee can manage the assets on behalf of a beneficiary until they are able to inherit them. However, common provisions that are used for trusts may not provide the right protection to an inheritance if the beneficiary goes through a divorce. During a divorce, a spouse’s assets are subject to equitable distribution, meaning they could possibly lose some of their inheritance. To prevent this from happening, there are certain provisions that can be put in place. Continue reading below to learn more and contact an Alabama estate planning attorney for assistance.
Should Distributions be Certain?
When creating an estate plan, language is crucial. While it can seem as if using language that is certain would be a good thing, it can sometimes have unintended consequences for beneficiary distributions in a trust. If it appears to the court that a beneficiary will receive distributions from a trust, there is a great chance they will be divided in a divorce. That is why phrasing should make distributions look expected rather than guaranteed. This can be done by saying “may” instead of “shall distribute” or “will be made.”
Naming Multiple Beneficiaries
It can also be helpful to name multiple beneficiaries of a trust to help protect it from being divided in a divorce. This can be done by naming beneficiaries in subsequent generations of the family, showing that more than one individual is meant to inherit it. This can help to sway the judge to not give it away in a divorce.
Consider Alternatives to Direct Distributions
Oftentimes, it is easier to convince the court that assets in a trust that are managed by a trustee should be left out of the divorce. Trusts are sometimes written to be distributed at a certain moment in a person’s life, such as a specific age or at marriage. However, when the money is distributed it can no longer be protected. It is because of this that instead of distributing these funds from the trust, the trustee can simply make payments for the beneficiary so the inheritance stays protected.
Contact our Firm
Stone Crosby, P.C. has proudly served clients in Alabama for over 100 years. Our firm has experience handling matters including divorce and family law, estate planning and administration, business law, employment law, class actions, consumer protection, business law, real estate law, among many others. If you require quality legal representation, contact our firm today to schedule a consultation.