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Separately-owned trust funds in a divorce

Some Colorado residents may be concerned about the fate of a trust that they separately benefit from if their marriage ends. In general, it's important to be careful when it comes to defining and using trust funds in the context of marriage. There are indeed risks involved should a divorce ever occur, but a little extra attention to detail in terms of how the trust is established and used can mitigate them.

Assets in a marriage are typically considered to be either separate or marital. As the name implies, separate assets will often be excluded from asset division in the event of divorce. In the case of marital assets, however, division is likely, and trust money may fall under this heading if care hasn't been taken beforehand. The settlors of a trust need to be clear and explicit about their intentions and who can take advantage of their generosity.

In the event of a divorce, a third-party trust can potentially be claimed by the opposing party under certain circumstances. For instance, commingling the trust money with joint assets can possibly negate its future consideration as separate property. In these cases, the written terms of the trust itself will often be the determining factor. If the terms are vague, a judge may rule about the ambiguity in a way that favors the other party.

In these cases, someone who is concerned about the status of his or her trust may wish to consult the matter with a lawyer. A lawyer can carefully review the document to determine whether there exist any problems that need to be addressed. In this way, it might be possible to finalize the divorce in a way that safeguards financial independence and leaves one's most valuable assets intact.

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Cooper, Tanis & Armas, P.C.
42 Garden Center
Broomfield, CO 80020