Why Some Spouses Use Trusts to Hide Assets During Divorce?

Why Some Spouses Use Trusts to Hide Assets During Divorce? Divorce proceedings can be complex, especially when it comes to financial matters. One strategy that some spouses use to protect their assets is by placing them in a trust. According to the default legal position, trust property is generally not considered part of the beneficiary’s personal estate, except in instances where the beneficiary is entitled to the assets. As a result, the trust assets would be excluded from the overall calculation of property to be divided during divorce, thus reducing the other spouse’s claim against the estate.

However, there are certain circumstances under which a court may choose to overlook this default legal stance. Specifically, courts have the authority to do this in two instances. First, if the court determines that the trust is merely a sham, designed to conceal assets. Second, if there has been a clear abuse of the trust form, the court can choose to disregard the protective cover that the trust might otherwise offer.

While using trusts to secure assets during a divorce might seem like a fool-proof strategy, it’s crucial to consult with a legal expert. If the court finds that a trust has been improperly used to hide assets or manipulate the financial situation, there could be severe legal repercussions.