Trust Beneficiaries and Divorce / by Cassandra Hearn

Asset division and determination of child and spousal support are often forefront in the minds of spouses going through a divorce.  For asset division, the parties must look to California’s property division laws, which state that California is a community property state.  This means that each party is entitled to half of the property that was acquired during the marriage, with a few exceptions.  For child and spousal support, the preliminary issue is often the income of both parties.  These issues can get complicated quickly.  These issues can get even more complex and convoluted when one of the spouses is the beneficiary of a trust.

When a trust is established before marriage, the trust is almost always separate property.  This means that the spouse who is not the beneficiary of the trust is likewise not entitled to what is in the trust at the time of the divorce.  Moreover, payments received from the trust during the marriage may also be separate property.  If the trust beneficiary was careful to keep the trust distributions unattached to marital assets, they may have remained separate property, and the other spouse will not be entitled to have those payments divided in the divorce.  However, like other separate property, if the beneficiary of the trust commingled the distributions, then they may now be marital property and subject to division in the divorce.

Although distributions from the trust are separate property, it does not mean that the divorce judge will overlook or ignore them entirely.  If the beneficiary receives regular distributions from the trust, then those amounts will be considered when determining child support and spousal support.  In other words, just because the other spouse is not entitled to a portion of the corpus of the trust, the beneficiary may still need to pay support based on regular payments he or she receives.

When there is a trust, the trust is controlled by a person called the “trustee” or sometimes a trust attorney.  The trustee is the person in charge of making the payments to the beneficiary.  If the trustee acts in bad faith and intentionally withholds trust payments to the beneficiary with the sole purpose of helping the beneficiary avoid support payments, it is possible that the divorce judge could enter an order compelling the trustee to make trust payments to fulfill the beneficiary’s support obligation.

Distribution of assets and setting support are complicated issues with many nuances.  Call us today at (619) 800-0384 to talk about your case and what we can do to help you with your financial future.