Trusts & Divorces

Many people wonder what happens to trusts in Connecticut divorces. How the divorce court will treat a trust is highly dependent on the specifics of that trust.

What are Trusts?

A trust is a legal agreement in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary. Trusts are established to provide legal protection for the trustor’s assets and to make sure those assets are distributed according to the trustor’s wishes.

Distribution of Trust Assets

Sometimes, the trust’s assets (technically called the corpus) are distributed all at once, such as at the time of the trustor’s death or when a beneficiary reaches a certain age.  Other trusts distribute the corpus, or perhaps the income earned from the trust assets, over time.

Changing the Trust

There are two pieces to know about changing the trust:

• Who can manage the trust’s assets, including distributions
• Whether the trust’s terms can be changed

Sometimes trust beneficiaries are also trustees who the trustor has given the right to control distributions or make changes to the trust.  Other times, a trustor is the same person as the beneficiary.

How all of this is structured in a specific trust will impact how that trust is treated in a divorce.

How Do Trusts and Divorce Property Division Work?

The most common questions about trusts and Connecticut divorces surround whether they will be divided between the spouses.

There are two myths out there about property division and trusts — and they are the exact opposite of each other.  All they have in common is that neither of them is true.

Common Misconception: Trusts are Entirely Shielded from Property Division in Divorces

Unlike in many other states, Connecticut law generally does not distinguish marital property from separate property.  That means that like inheritances, sometimes trusts are subject to property division.  Connecticut is an “all property” property division divorce state.  That means that Connecticut courts can divide all of either spouse’s property in a divorce — including trusts.

Courts tend to look to how much control or access a spouse has to trust in order to decide whether a trust is “on the table.”

Common Misconception: The Entire Value of the Trust Will be Divided

When a spouse has an interest in a trust, it may not be an interest in the entire trust.  Once again, determining the specific nature of the spouse’s interest in the trust (including whether it’s vested or unvested or subject to any contingencies) is critical.