Originally published by Evan Hochschild.
Aside from my bad attempt at humor in the title to this blog post, the
subject of how spouses structure and protect their assets is very important.
I think a lot of people will consider whether or not their soon to be
spouse is in
debt and how much income he or she earns but rarely how their
property is allocated. Quite honestly many people are not in a position where this
is an issue. Certainly though, you don’t have to earn a million
dollars a year or anything close to it for you to have accumulated assets
worth protecting.
If you or your spouse have a
trust among your assets then you are in an envious situation. You’ve obvious
done something right in your life and have set yourself up for future
successes as well. Nobody decides to get married with the assumption that
their marriage will end in
divorce but unfortunately many marriages do not last.
When you were planning for your financial future it’s possible that
you met with a financial advisor, attorney or other “expert”
who told you that if you put your assets in a trust that they would be
protected against anyone trying to get their grubby hands on whatever
it is you are trying to keep safe. This includes the income that you put
into the trust as well as any distributions that result from that income.
Unfortunately, this is not always the case. Let’s discuss this issue
in greater detail.
Premarital agreements may still be a smart decision to enter into even
if you have a trust in place
A
premarital agreement is not overkill even if you are the beneficiary under a previously created
trust. A prenuptial agreement does not mean that you are betting on your
marriage failing or that you are suspicious of your soon to be spouse.
On the contrary, a prenuptial agreement can help you and your bride/groom
to be on the same page as far as money, finances and your marital estate
are concerned.
A part of what a prenuptial agreement offers couples is the ability to
make sure that no matter what your trust spells out in terms of income
protection or beneficiaries that all distributions from the trust and
all interest from the trust is the
separate property of you as the beneficiary. In this way there is no confusion, hurt feelings
or apprehension about what will happen if your marriage were to end- either
by death or divorce. This protection will go into place now and applies
into the future as well. Prenuptial agreements allow you to keep the contents
of your trust private and saves you time and money in defending against
its contents and purpose in a future divorce lawsuit.
What you assume to be true vs. what in actuality is true
Many people who are named as beneficiaries under a trust believe that if
he or she divorce their spouse that their trust’s contents will
be viewed as separate property by a divorce court. The key to this understanding
is that separate property is not considered divisible in a divorce but
would go one hundred percent to either you or your spouse- whichever of
you holds that separate property right. This assumption is just that-
an assumption, and is not always the case.
On the other hand, a prenuptial agreement is held as an agreement made
by the parties to a divorce that is typically honored by a divorce court
without question. I cannot speak in absolutes here (nor would I on any
subject that we blog about) but from my experience prenuptial agreements
are more “ironclad” than a trust would be in this situation.
Look to the intent of the trust to determine whether or not its contents
are separate or
community property
Trust agreements give the trustee written instructions on how to distribute
the income from the trust. Whether it be for educational, health or basic
needs of the beneficiary, the trustee cannot act at their own discretion
in distributing its contents. The distributions made within the trust
are based on what the trustee believes to be in line with the intent of
the trust agreement and considered to be separate property.
Ultimately the source of when the income or interest is distributed will
decide whether or not the distributions are treated as separate or community
property. If the distributions are considered to be income then you may
find yourself dealing with community property as you would income from
a job. A judge in your divorce may also consider whether you are acting
as your own trustee under the trust or if you’ve hired an outside
person to act in that capacity. Regardless, if you and your spouse agree
to a premarital agreement then this whole discussion is rendered moot
due to your spouse having previously agreed to not take an interest in
your trust.
Prenuptial agreements smooth many rough edges of divorce
If nothing else, prenuptial agreements can help you and your spouse get
through a divorce with minimal headaches. Think about it this way- would
you rather negotiate with your spouse when you are still happy with one
another, or wait until you can’t stand the sight of one another.
Even if you are divorcing on “good” terms it still cannot
compare to the objective and clear-mindedness that you and your spouse
have prior to the marriage. A faster, easier and less expensive divorce
is the most likely result.
The Law Office of Bryan Fagan: Effective advocates for southeast Texas Families
If you have any additional questions on premarital agreements, or any other
subject in
family law, please do not hesitate to contact the
Law Office of Bryan Fagan today. Our licensed family law attorneys will assist you in walking through
this issue and can answer any questions you have. A free of charge consultation is a
phone call away and available to you six days a week.
Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.
from Texas Bar Today http://ift.tt/2hYPxVi
via Abogado Aly Website
No comments:
Post a Comment