Using Trusts in a Divorce

As part of estate and tax planning, individuals can place their assets in a trust. These include joint assets acquired during a marriage, pre-marital assets, or marital assets in one party's name. There are personal trusts for designated purposes, for example a trust imposed over real estate, such as a Qualified Personal Residence Trust (QPRT). A married couple could use a QPRT to place a jointly owned home in a trust and name the wife as the beneficiary and the child as a contingent beneficiary. Other trusts can serve as mechanisms for sheltering assets from taxation or can serve as a way to exclude assets from an estate or to protect assets. In a divorce case where a trust exists, it is possible to terminate the trust, with the agreement of all the parties, to utilize the proceeds to meet the needs of the parties in effectuating equitable distribution. Bear in mind that the termination of a trust can only be achieved by agreement and therefore such a goal cannot be achieved in a litigated matter. As part of a divorce settlement, certain types of trusts can be created for funding education expenses or covering medical expenses. These trusts would provide a mechanism for meeting support obligations.