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How do you protect trust assets in a divorce?

Many Texans who get married are the beneficiaries of trusts set up by parents, grandparents or others. Some are named as beneficiaries during their marriage. These trusts can provide a much-needed source of savings and income for those pursuing advanced degrees, are retiring or when finances become strained.

However, how do you ensure that your spouse won't be able to take some of the assets from a third-party trust if the two of you divorce, particularly in a community property state such as Texas?

Careful legal planning is key. First, you want to make sure that it is designated as separate, rather than marital, property. The person who is establishing the trust (the grantor) can include language that it is not to be considered marital property and not to be part of any divorce settlement. An estate planning attorney will know how to do this.

If you get a prenuptial agreement before you marry (which is important to do if you have assets of your own that you want to protect), you should also include language about the trust in that document. The same is true if you get a post-nuptial agreement. Your family law attorney can help you with that.

It's important not to co-mingle any funds in the trust or from payouts from the trust with your marital assets. That will only complicate the situation.

If none of these precautions has been taken, you could potentially run into problems in a divorce if your estranged spouse tries to get a share of your trust assets. Your family law attorney can provide advice to help you work to keep the assets that your loved one intended for you to have.

Source: Forbes, "What Divorcing Women Need To Know About Protecting Third-Party Trusts," Oct. 08, 2015

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