How a family trust affects divorce settlements
In a divorce, does it affect the settlement if my spouse is a beneficiary of a family trust and plans to buy her parents’ house from the trust at a discounted price after the divorce?
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Thank you. Generally, assets that are part of a family trust your spouse benefits from are treated as separate property, meaning they are not subject to division in your divorce. Because the trust existed before or outside your marriage, any property owned by that trust or purchased through it typically belongs to the trust—not to your wife personally—unless community funds were contributed to it.
The fact that she will be allowed to purchase her parents’ house at a discounted price after the divorce does not usually change that, since the opportunity arises from her status as a beneficiary and not from anything acquired during the marriage.
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I’m currently going through a divorce. My wife is a beneficiary of her family trust. Her parents’ house was purchased under that trust, and after our divorce is finalized, she’ll be purchasing it at a discount. Does that have any bearing on the divorce proceedings?
Lexi, Chatbot
I understand that navigating a divorce can be quite challenging, especially with financial matters involved. Can you please share how long you and your wife have been married?
15 years.
Lexi, Chatbot
Is there any ongoing negotiation regarding asset division or spousal support that involves this family trust?
No, the trust that she’s a beneficiary of has never been discussed throughout our divorce process.
Lexi, Chatbot
Is there anything else the family lawyer should know before I connect you? Rest assured they’ll be able to help with your divorce proceedings.
Yes.
Patrick, Esq.
Hello, my name is Patrick. I am an attorney with more than 15 years of experience and it will be my pleasure to assist you with your question.
Patrick, Esq.
Can you please clarify whether your wife’s potential purchase of the house through the trust will occur before or after the court issues the final judgment of dissolution?
Patrick, Esq.
Thank you very much and I look forward to assisting you.
As far as I know, she has not purchased it and she’s waiting for the final sign-off on our divorce.
Patrick, Esq.
Thank you. Generally, assets that are part of a family trust your spouse benefits from are treated as separate property, meaning they are not subject to division in your divorce. Because the trust existed before or outside your marriage, any property owned by that trust or purchased through it typically belongs to the trust—not to your wife personally—unless community funds were contributed to it.
The fact that she will be allowed to purchase her parents’ house at a discounted price after the divorce does not usually change that, since the opportunity arises from her status as a beneficiary and not from anything acquired during the marriage.
Patrick, Esq.
The key question is whether marital funds or efforts were ever used in connection with the trust property. For example, if community money was used to improve or maintain the home, or if her right to purchase it at a discount was negotiated or earned during the marriage, then it might have some limited relevance to the division of property. Otherwise, a post-divorce transaction involving her family trust would not normally affect your case.
She has temporary custody and I’m just wondering how my child support payments are gonna be based off of a number that will change directly after our divorce and her expenses will drop drastically, but I’ll still be paying on the original amount stated in our financial documents we provided.
She’s also lived there for free for over a year.
Well, I spent upwards of $20,000 on apartments and Airbnbs.
Patrick, Esq.
Child support is generally based on both parents’ incomes and the actual living expenses of the child at the time the support order is made, not on anticipated future changes. However, once her housing situation changes after the divorce—such as if she begins paying rent or mortgage, or if her overall expenses decrease—you can request a modification of the support order to reflect the new circumstances.
Patrick, Esq.
The fact that she has lived rent-free for a year and you’ve shouldered significant housing costs may also be relevant to the court’s understanding of the overall financial picture, particularly if it demonstrates a material imbalance in living expenses. While that may not change the initial order, it strengthens the basis for seeking a modification once her expenses drop after the divorce becomes final.
So I should be sure to somehow make it known that for over a year, she saved money on expenses and mortgage and rent, and was actually able to save a significant amount of money compared to myself who had thousands and thousands of dollars of living expenses?
Patrick, Esq.
Yes, you should absolutely make that known. The court considers the financial circumstances of both parties when determining child support, including disparities in expenses and living situations. Demonstrating that she lived rent-free and accumulated savings while you incurred substantial housing costs helps paint a fuller picture of each parent’s financial reality and may support your position when the court reassesses or modifies support.
Along with that, after five years, I found out she had a separate retirement account I never knew about, and once we decided to separate, she started putting less money into her retirement plan that I knew about and more into the one that I didn’t know about while I continued to put in the same amount.
Patrick, Esq.
That is significant and should be brought to the court’s attention, as well. Retirement accounts accumulated during the marriage are generally considered community property, regardless of which spouse’s name they are in. If she diverted contributions to an undisclosed account after separation discussions began, that could indicate an attempt to conceal marital assets, which the court takes seriously. You may request account statements through discovery or subpoena to determine the extent of those contributions and ensure any hidden funds are properly included in the division of assets.
Well, she had the account for five years, but started increasing into that account after we decided to separate. I’m not sure how I missed it doing our taxes and what not, but I certainly didn’t know about it until a statement came in the mail. And she stated she didn’t know she had it or signed up for it.
Patrick, Esq.
The timing of the increased contributions after separation still could raise questions about intent, so it would be wise to obtain the full account history through discovery or subpoena to determine whether marital income was used and whether any concealment occurred. I hope this helps. Was there anything else I can do for you this evening?
Yes, just one more question. I’m sorry.
Patrick, Esq.
Sure...
As her family is wealthy, I believe they will also provide her with cash or return the cash that you purchased the house with. And also, if there were any businesses that her family owned that she may have possibly been involved in or receives money from those businesses that I was not aware of, I assume you can reopen your divorce and review?
Patrick, Esq.
If new assets or income sources are discovered after a divorce is finalized, such as hidden business interests or undisclosed financial assistance from family, you can petition the court to reopen the case based on fraud or nondisclosure. Courts take the duty of full financial disclosure seriously, and intentional concealment of assets can justify setting aside or modifying the judgment.
OK, thank you. You’ve been very helpful. I appreciate your time.
Patrick, Esq.
Very glad I could be of some assistance. Have a pleasant evening!
Patrick, Esq.
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