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Divorce: Trusts & Inheritance
Because a Trust or Inheritance is a type of Property, we must begin with the types of property considered in a divorce. In Missouri, the law recognizes two types of property – separate and marital. Separate property is the property of one spouse obtained prior to the marriage. Marital property is property the parties obtained during the marriage. Sometimes a party can convert separate property to marital property by, for example, titling a house purchased prior to the marriage jointly in the names of both parties. One challenge in dividing property is untangling commingled property.
Any trust in the name of the former spouse will be considered a marital asset subject to division. Any joint but irrevocable trust that does not have provisions in the trust for division upon divorce will also be subject to division by the court.
A family trust generally remains separate property. However, if your former spouse helped increase your share of the family trust during the marriage, that contribution could be considered subject to division.
Inheritance is determined by the instrument that creates it – a trust or a will, for example. Those documents should contain instructions on how to handle any taking in the event of divorce.
A situation clients sometimes encounter is the receipt of an inheritance during the marriage. If the beneficiary spouse keeps the inheritance segregated, it remains separate property. However, if the beneficiary spouse converts some or all of the inheritance by commingling or joint titling, it can become a marital asset subject to division.
If you are concerned about protecting your trust or inheritance as separate property, the best time to consult an attorney is prior to receiving any proceeds of the trust or inheritance.
Even if you commingled assets from a trust or an inheritance, you may still have options short of splitting the trust or inheritance with your former spouse.