By Thomas D. Colin, SCK partner and Former Family Court Judge
A divorcing spouse’s interest in a trust can impact the outcome of some Connecticut divorce cases. As a divorce attorney who handles many high net-worth clients and a former family court judge, I often get questions about the impact of trusts in a divorce settlement. Clients want to know:
- Are trusts handled like other property and assets in divorce cases?
- Can trusts be used to protect financial assets from being divided in a Connecticut divorce case?
- Can a spouse’s interest in a trust affect alimony and child support?
Trusts may or may not be considered property for divorce purposes. Under Connecticut divorce law, property is subject to division by the family court. Property is broadly defined under Connecticut family law as assets owned by one or both parties. This may include real estate, bank accounts, retirement accounts, brokerage accounts, cars, furniture, jewelry, intellectual property, art, antiques, and anything else a spouse owns.
Whether trusts are considered property is not cut and dry. A spouse’s interest in a trust may be considered property depending upon several factors:
- The law of the state/jurisdiction that governs the trust
- The specific terms and conditions of the trust document
- The history of the trust’s origination and administration.
Let’s take these factors one at a time:
The law of the state/jurisdiction that governs the trust - A trust is created under the law of a single jurisdiction, such as a specific state or country. The document used to create the trust is often referred to as the trust instrument. The trust instrument will generally indicate the state/jurisdiction under which the trust was created. It is important to determine whether the trust’s formation was done correctly in accordance with the law of that state/jurisdiction. If it was not done in accordance with the law, it is possible that the trust may be considered invalid and, therefore, could be considered as property in a divorce settlement.
The specific terms and conditions of the trust document –These factors will outline the rights of all parties to the trust, including the grantor/settlor (the person who created the trust), the trustee (the person who holds and manages the property held in trust), and the beneficiaries. For example, does the spouse have the right to receive income from the trust assets? Does the spouse have the right to receive the property held in trust? Do the children of the parties have the right to receive income and property from the trust? Can the trust be used to pay educational, medical, or other expenses of the parties and/or their children? The specific language of the trust instrument is a crucial area of inquiry by any skilled divorce lawyer.
The history of the trust’s origination and administration - The history of how the trust was acquired and used by the parties during the marriage may be a relevant factor in determining the trust’s importance in a divorce case. When was the trust created? Was it created before or during the marriage of the parties? Did a family member of a spouse create the trust? Did the family use the trust for living expenses? Was the trust used to buy or renovate a home? Did the family use the trust for other significant family expenses? Alternatively, was the trust never used by the family during the marriage?
A skilled divorce lawyer can assess how these factors apply to a divorce case. An analysis of them may significantly impact what, if any, property and income may be available for division by the court. It may also be part of determining child support, alimony, and the payment of other post-divorce obligations. In certain cases, it is helpful for the parties to seek input from an experienced expert in the field of trust law, particularly someone knowledgeable in trust law in the state/jurisdiction that governs the terms of the trust. An experienced family law attorney can often identify the need for such an expert and where to find one.
In conclusion, it is crucial for spouses going through the divorce process to inquire about the existence of trusts so they and their attorneys can fully and completely determine all relevant financial circumstances involving that trust.
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Thomas D. Colin is a partner at Siegel, Colin & Kaufman who was named 2024 "Lawyer of the Year" in Family Law in Stamford by Best Lawyers®. He is a former Connecticut Superior Court Judge who served as the Presiding Family Court Judge in Stamford, Connecticut. Contact him for help with divorce, including business valuation, alimony, legal separation, custody and visitation, child support and division of marital assets. Contact Tom in the Stamford office at (203) 326-3332 or by email to schedule a consultation.