Depending on the terms of your trust, a marriage may override the trust. But if you’d like to have your trust supersede the marriage, you can dictate terms within the trust document that amend the way the trust is handled, even if you pass away while married. 

If you want to plan your estate, a trust is an excellent choice. But how will your marriage affect your trust? Legally, there is a lot to consider about the intersection between marriage and trusts. The following article explores the ways in which marriages can override trusts and how marriage custody cases unfold legally.

Basics of Trusts—What You Need to Know

For the purpose of estate planning, a trust is your best option to handle your assets and create a safe way to pass them along after you’ve passed away. But what happens to your spouse after you die? Let’s examine how a trust works.

What is a Trust?

A trust is a way of holding assets on behalf of someone else (the beneficiary). The trust can legally hand over those assets to another person. Trusts are a common way to structure estate planning for the holding, organisation, and eventual distribution of assets after your death, without necessarily going through probate.

The grantor or settlor, that is the person creating the trust, establishes the framework under which a trust functions. That may include decisions regarding who the beneficiaries are, what assets will be designated to go into the trust and how and when those assets can be distributed. 

Trusts are also often preferred over wills because the contents of a trust do not become part of the public record at the grand grantor's death and families can keep their financial affairs more private.

Different Types of Trusts

Trusts come in many shapes and sizes, all of which have different uses. A few of the frequent ones include:

• Revocable Trust:
  The grantor can change or terminate the trust at any time during their life. Not as effective for asset protection but a solid plan for passing along assets.
  
  
• Irrevocable Trust:
  The grantor cannot change or terminate the trust once it is set up unless all of the beneficiaries agree. This is the best choice for asset protection and legacy building.
  
  
• Testamentary Trust:
  Instituted by will and taking effect at the death of the grantor. Still has to pass through probate as it's determined by a will.
  
  
• Living Trust:
  Created during the grantor's lifetime and may be either revocable or irrevocable. The grantor can be named as the trustee, still controlling the assets within the trust.

All have some pros and cons, so it is important to select a trust that complements your financial objectives and situation. For example, a revocable living trust is flexible and may or may not offer significant asset protection, unlike an irrevocable trust which can shield assets from creditors and lawsuits. 

Trust Beneficiaries and Their Role

The beneficiaries are the individuals (or entities) who may enjoy the benefits of the trust. As per the terms established by the grantor, they can take receipt money or property from the trust. 

How does this work? Well, let’s say you want to make sure that your life insurance policy doesn't wind up in probate. You could use a trust to ensure that your life insurance policy is directly and immediately given to your beneficiaries, no probate, no delay. 

A trust document sets out the rights and interests of the beneficiaries of the trust. In almost all cases, they do not have any say over how the trust is managed or operated. 

Trusts may also have contingent beneficiaries in specific cases where the primary beneficiaries cannot receive benefits until a condition is met (like graduating college or reaching a certain age).

Marriage + Trusts

But what about your spouse? How does he or she come into the trust? And does the marriage override the trust you’ve created? 

The Impact of Marriage on a Trust

Marriage, especially from the legal perspective has a variety of implications, especially concerning property & asset distribution. Depending on your state, when one spouse sets up a trust before or during marriage, the other spouse might have some rights.

Typically, a trust created prior to the marriage retains its character as separate property. Yet, when assets of a trust are administered with marital funds or marital efforts, this blurs the lines of marital and separate property. That means that it could affect how assets might get distributed in the event of divorce or death. 

This is especially important in what are called “community property” states, where assets you acquire during the marriage are generally viewed as held jointly. Those nine states are Arizona, Idaho, California, New Mexico, Nevada, Louisiana, Texas, Washington, and Wisconsin.

The way in which you manage a trust can change based on your marriage. For example, if the surviving spouse is not also a trustee on their spouse´s trust, they could have a stronger claim to assets in the other's separate trust. 

Normally, a trust is administered separately from a marriage, but there are practical implications and consequences of how your spouse is named and treated in the trust. 

Trusts and Prenuptial Agreements

As a reminder, prenuptial agreements (or prenups) are contractual forms that will be written and signed before you marry. These prenups can specify what happens to a trust and the assets within it in case of a divorce. In this case, a marriage can override a trust if there is a prenup in place. 

A prenuptial agreement can benefit from trusts to safeguard assets that might need to be treated in a particular way, such as children of an earlier relationship. Make sure you get legal guidance before putting trust provisions in a prenup to make sure it is clear and enforceable. 

Talk with your spouse about your prenups and trust documents. If couples can tackle these tough topics early, they have a better chance of creating a peaceful financial teamwork that everyone benefits from. 

The Legal Framework of Marriage and Trusts

But what will the court say about your marriage and your trust? These are common concerns. Let’s look briefly at the legal complications of how marriages can override a trust. But remember that each state has its own regulations. Speak with an attorney about your state’s view on marriages and trusts. 

Trust and Its Effect on Marital Property Rights

Every state has different laws regarding what is considered marital property (property gained during the marriage). Knowing if one spouse has a trust and how that trust interacts with marital property laws is integral in some of your cases.

In some states, like Colorado, trusts can be separate property, while in others, like California, marital funds that are contributed to a trust for the benefit of one spouse by another, then the non-trustee spouse can get part of those assets in a divorce. 

For anyone coming into a marriage with a fair chunk of assets, this requires careful pre-planning and documentation. The type of trust, (revocable or irrevocable) can also determine how those assets are treated. 

But which trust is best? It depends. If you create an irrevocable trust, then your assets are no longer yours. They legally belong to the trust, as a completely separate entity. If you’re worried about your spouse gaining control after a divorce, they typically won’t have access to irrevocable trust assets. 

Trusts in Divorce Proceedings

It’s never easy to go through a divorce. It calls into question whether the trust’s assets will be counted as part of the marital estate or remain separate. All of this depends on the timing and source of trust contributions. 

In the case of an irrevocable trust, the assets should, in theory, be insulated from divorce attacks. But a trustee's indiscretions or misappropriation of trust assets can cloud the picture. 

Further, each party also needs to remain open about what has happened with trust assets during the marriage. Failure to disclose trust interests can result in allegations of concealing assets, which can be punishable by law. In some cases, courts require forensic accountants to determine the sources of monies and identify who is contributing what to the trust.

Managing Your Trust During Marriage

Although each state differs in how a trust is managed, we can generally give you some guidance about how to think about creating and managing your trust when you’re married.  

Protecting Trust Assets

These are some of the strategies that can help to keep trust assets protected in a marriage. 

• Create a revocable trust -  This makes it super flexible as your marriage status changes.
• Use a prenuptial agreement - This will help clear up how trust assets are treated in a divorce.
• Keep trust assets separate - Never mix personal assets with marital assets.
• Stay informed - Revising all trust documents should be a regular activity. This is often overlooked. 

Legal Advice For Trust Holders Contemplating Marriage

As a trust holder considering entering into marriage, take it from me and get some legal help. For personalized direction, you should speak with a family law and estate planning attorney.

Talking to a lawyer about your trust's goals and how it interacts with marriage can be clarifying. You’ll understand your rights, and how marriage can override the trust.  

Finally, be sure to take into account what state laws will have an impact on your trust. This is especially true if you live in a community property state. Their state laws will determine how certain assets are treated during your marriage. 

Marriage & Trusts FAQ

Can a Spouse Override a Trust?

Typically, a trust provision cannot be overridden by a spouse. But if the spouse has specific legal rights written in the trust document (or state laws), they might have a claim over marital property. 

In certain areas, spousal rights may allow for a portion of the trust assets to be claimed by the spouse if that trust was established during the marriage. If you try to intentionally cut out your spouse, this can be even worse legally. 

You have to also consider the type of trust because this is how a trustee can control the terms. Revocable living trusts permit the grantor to modify them as they see fit. You could add or remove a spouse. But by contrast, irrevocable trusts are set in stone. Once created, they generally cannot be altered without the consent of all beneficiaries. 

What Is The Impact Of Remarriage On A Trust?

Additionally, the terms of a trust can become even more complicated with remarriage, especially if the grantor wants to leave assets for new beneficiaries such as children from the new marriage. You should update the trust documents to reflect any relationship changes so that everyone is properly considered. 

The structure of blended families often requires careful wealth and estate planning. Your trust should allow for any children by another marriage. In this way, you make sure you’re providing equally for your new spouse and your previous family. 

Moreover, the timing of these updates is important as well. If you don’t revise the trust upon remarriage, your new spouse could receive assets that you intended for your children. Consult with an estate planning attorney to help you navigate these changes. 

Will a Trust Keep Property Safe from Divorce?

If drafted correctly, a trust can offer asset protection in the event of a divorce. However, courts could still look at the character of the trust contributions and all other relevant factors in the marriage. 

For instance, property that was put into a trust before marriage could be held as separate property — assuming it wasn't mixed with marital funds. When it comes to divorce, it matters a lot about when the assets were put in and with whose money.

A spend-thrift trust (a trust that limits a beneficiary's control of the assets of the trust) will not require action by the court to be enforced and may provide more protection from claims by a spouse in a divorce. 

Marriages and Trusts: Your Say

What concerns you most? Protecting your assets in the case of a divorce? Or are you looking to create a trust that looks after your spouse, even after you die? Your goals determine how a trust is treated before, during, and after marriage. 

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But if you need some guidance, contact us. Fill in the form below and we’ll be in touch to talk through your questions, concerns and goals. We’d love to help you choose the right trust for your marriage. 

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Why wait? Contact us today by filling in the form below. Let’s get your finances secured.  

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