Does a Trust Protect Assets in a Divorce?

At the time of a divorce, couples who are parting ways must work together to make a decision about the division of marital property. While this may be simple and straightforward for some couples, for others, it can be very complicated. Making a determination about property division is complicated even further when the parties are in a high-asset marriage or have complex assets. If you are divorcing and wondering how to protect your assets, the following is an overview of Tennessee’s equitable distribution rules, as well as how a trust can be used to protect assets in a divorce.

Equitable Distribution in Tennessee

In the state of Tennessee, a couple’s assets must be divided in a way that is equitable. While equitable division can mean equal division, it does not necessarily have to. What is more, note that only marital property will be subject to division (more on this below). If couples are unable to reach a property division agreement on their own, factors that may be considered by the court in making a determination include:

• How long the marriage has lasted;
• The value of separate property of each party;
• The age and physical health of the parties;
• The tax consequences to each party; and
• More, including any factors the court finds relevant.

Separate vs. Marital Property

As stated above, only marital property, not separate property, will be subject to division in a divorce. Marital property means all property acquired by either spouse during the course of the marriage, except gifts or inheritances, depending on how those were handled. Separate property is any property owned by a spouse prior to marriage, or received as a gift or inherited, including assets held in an IRA. Tennessee Code Annotated § 36-4-121 is the applicable statute. Having a prenuptial or post-nuptial agreement will also affect the division of property in a divorce.

Trusts That Can be Used to Protect Assets in a Divorce

If assets are held in a trust, they may be exempt from the rules of equitable distribution. Trusts may be used to protect assets when:

• The trust was established prior to the marriage and assets in the trust were placed in the trust prior to marriage;
• The assets in the trust were given to one spouse via gift or descent; or
• The trust is anirrevocable trust, which means that the grantor does not have any control over the trust.

Depending on the type of trust, other special circumstances may apply. It is best to talk to a financial professional and a divorce lawyer to ensure you have a full understanding of your rights and options.

Talk to a Franklin Divorce Lawyer Today

Working with a divorce lawyer during a divorce and property division settlement can be extremely valuable, especially if you are in a complex divorce case with high assets. At the office of Judy Oxford, Attorney at Law, I have years of experience and striving for excellence. I understand how emotional and frustrating divorce can be. I will give my best effort to provide you with the guidance you need every step of the way. To schedule a consultation with me, Attorney Judy Oxford, please send me a message directly or call my law office at your convenience.