Thursday, February 18, 2010

How does divorce affect your trust?

By: Patrick D. Newton:  If you set up a revocable trust for your self that has provisions in it for your spouse, including naming the spouse as a current or successor trustee, those provisions are revoked upon divorce.  This default rule could be changed in the trust document itself, but generally would not be.

As for an irrevocable trust, the Grantor's divorce from a spouse who is a beneficiary, or a trustee, does not impact the irrevocable trust at all.  This general rule could also be drafted around.  Typically, if you are creating an irrevocable trust for your spouse, you will want to include language that will deem the spouse as deceased upon divorce. 

If you are creating an irrevocable trust to qualify for the unlimited marital deduction, you cannot have such a provision and also qualify for the marital deduction.  You could, however, terminate the spouse's role as a trustee, and you could arguably terminate any access to principal.  The income in a marital deduction trust must continue to be paid to the spouse for his or her lifetime.

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