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Are Trust Assets Excluded in Divorce?

Possibly.  Generally, if a trust is modifiable, then the assets are subject to division.  The generally Husband-Wife, also known as A-B Trust, is known as a revocable living trust.  Since the grantor has the ability to revoke, modify or change, then the family court will also have the ability to modify, change or determine the outcome of assets held in that trust.  This, like most assets, become a source of contention when the parties are divorcing. A living trust can provide you with the peace of mind that comes from knowing that your assets and your heirs will be protected in the event that you unexpectedly become unable to handle your own financial affairs. It eliminates the need for your estate to pass through probate court before it can be passed on to your heirs. Properly worded, a trust can also be used as a substitute for powers of attorney. Your trust can be written in a way that will pass your assets on to your beneficiaries immediately upon your death, or you can designate that they be portioned out over time and in amounts that you specify. Your attorney can help by including tax savings clauses that may help to reduce state and federal estate taxes.  The assets held in trust generally avoids probate, which saves on probate fees, executor fees and legal fees.  Additionally, a living trust also avoids the decedent's entire finances becoming public as probate court is a public forum. Among the things that a trust cannot do is protect against a disgruntled heir.  A living trust can resolve some of the most common family conflicts that may arise in the inheritance arena, however, if you cut someone out of your living trust as a beneficiary, he or she can challenge the trust just as a will can be challenged. An irrevocable trust is not modifiable by the grantor or trustee and is generally not modifiable by the Courts.  These are seldom used except in cases of 2nd generation or to avoid some type of taxes. If you have questions about how a trust may be determined in your divorce, contact and retain an attorney.  For advice in Northern Kentucky, call Michael Bouldin at 859-581-6453 or email at [email protected].

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