Possibly. The division of marital property in Ohio is always complicated, and trusts add to the complexity. Trusts are legal vehicles for holding property. A trustee manages the trust for the benefit of beneficiaries. Because the property is owned by the trust, some people assume that they can use a trust to shield assets in the event of divorce. The law is a little more complicated than that.
For help with the division of marital property, including dividing a business or splitting up a medical practice, contact an Ohio divorce attorney for more information. We can review your trust and determine whether the assets contained in it will be divided during the divorce.
Are Assets Marital or Separate?
When divorcing, not all assets you own are considered marital. Put simply, the property you owned before marriage is considered your separate property, and you can usually leave your marriage with it. Likewise, gifts or inheritances are typically considered separate, even if you received them after exchanging wedding rings.
Under Ohio law, almost all other property is considered marital and can include:
- Real or personal property owned by either spouse when acquired during marriage
- All interests in real or personal property acquired during marriage
- Income and appreciation of separate property during the marriage
The name on the asset is not key—instead, when the asset was acquired is the real determining factor.
When Did You Create Your Trust?
If you created and funded a trust before marriage, then it is likely separate property. It would be as if you bought a car before marriage—it’s yours, and you should be able to take it when you leave.
When Did You Become a Beneficiary?
Someone else (like a parent) might have created the trust and named you as a beneficiary. The key is to determine when you became a beneficiary. If you did before marriage, then the trust is likely separate. However, if you did not become a beneficiary until after marriage, you should review the trust with an attorney.
How Much Control Do You Exert Over the Trust?
There are countless types of trusts, but most people have one of two types:
- Revocable trust. You create this trust while living and typically serve as both the trustee and the beneficiary. Revocable trusts are popular because the grantor who creates it retains control. You can move assets in and out of the trust or shut it down if you want.
- Irrevocable trust. With this type of trust, the grantor gives up control. Once created, the trust is set in stone and the grantor does not have the right to shut it down or shuffle assets in and out.
The type of trust can matter in an Ohio divorce. Generally, revocable trusts created after marriage are marital property even though the assets are owned by the trust.
Did You Commingle Assets in the Trust?
Commingling is a huge problem when it comes to property division. Imagine a savings account in a bank. Your father left you $20,000 and you put it in the account. However, over the years, you also deposit your paycheck while married. Here, you are commingling separate property (your inheritance) with marital property (your paycheck while married). Assets can become commingled and eventually lose their character as separate property.
Something similar can happen with a trust. You might have created and funded your trust before marriage but then, while married, put additional assets into the trust. You will need to work with a lawyer to try and separate out the marital property from the separate property, otherwise the entire trust could very well count as marital property.
Do You Want to Create a Trust after Divorce?
This is an excellent estate planning tool and something you should consider once you get your divorce decree. For example, you might not be financially savvy and have relied on your spouse to do most of the investing. With a trust, you can select a trustee with the right financial experience to manage the trust assets.
Trusts can also shield assets from creditors. As Forbes reminds us, potential liability hangs over all our actions and can include liability for a car accident. You can protect assets by putting them in a trust.
Remember not to create the trust until your divorce is final. We have seen endless headaches when people jumped the gun and tried to pour all their assets into a trust while the divorce is still pending.
Give Us a Call
Lawrence Law Office can help you create the right trust for you. Whether you are an executive, a real estate investor, or other type of professional, we can also fight to keep trust assets as your separate property in a divorce. Contact us today to schedule your initial consultation.