Do I have to share my trust fund in a divorce? p2
On its FamilyFacts.org website, the conservative Heritage Foundation has collected some interesting statistics about inheritance and divorce that we thought fit nicely with our discussion of property division in divorce. Research has shown, for example, that the first year following separation sees more than six times as many mothers fall into poverty as fathers. And, mothers who were already living below the poverty line at the time of the separation are much more likely to stay there following the separation: While 75 percent of mothers remained in poverty, only 25 percent of fathers did.
It is especially important for women to understand what assets are theirs alone and what could be subject to property division in a divorce. It may be just as important, too, for an estate plan to protect a bequest from benefitting someone other than the original heir.
In a divorce or a legal separation, there are two types of property, individual and marital. Generally, anything that a spouse owned before the marriage qualifies as that spouse's individual property. Anything the couple purchased during the marriage is marital property, the property that the couple must divide at divorce. In a community property state like California, the marital estate is divided in half. In an equitable distribution state, like Illinois, the court will look for a fair and equitable, not equal, division of property.
Michigan adds a wrinkle to the definition of marital property. Sharing or contributing to the improvement of an asset could transform it from individual to marital property. For example, a woman owns a valuable painting at the time of her marriage. By the time they divorce, the painting's value has doubled. The increase in value may be marital property that the parties would have to divide fairly in their property settlement.
One spouse's inheritance may also become marital property under certain circumstances. For example: Husband receives a lump sum distribution from his mother's estate that he deposits into the couple's joint savings account. The money is now marital property.
It's easy to write a will. With a few formalities, it's all taken care of in a matter of minutes. It is not as easy to devise an estate plan that protects assets and bequests by taking contingencies into account. An experienced trust and estates attorney can help.
Source: Forbes, "What Divorcing Women Need To Know About Protecting Third-Party Trusts," Jeff Landers, Oct. 8, 2015