Will a Trust Protect Assets in a Birmingham Divorce?

Posted by Steven D. Eversole | Aug 16, 2012 | 0 Comments

At some point in almost every divorce, the question of assets arises – if they will be divided, how they will be divided and whether will be subject to change depending on some future condition.


Assets are defined as anything from the house and the vehicle to your stocks or share in a small business.

Birmingham divorce lawyers know that one way to protect those assets is the prior establishment of a trust.

Many people view trusts as an option for the extremely wealthy. This is not so.

The fact is, any person can establish a trust, and you don't need anyone's permission to do it. However, there are very specific laws – both state and federal – that specify how it must be done.

In a divorce, many of the assets acquired during, and in some cases before, the marriage may be subject to division. However, if those assets are in a trust, they may be protected.

Many people may not even be aware that trusts are an option. A trust is essentially a place where property or assets are reclassified and preserved in such a way that they may be protected from certain estate taxes, probate – and even divorce. A trust agreement is a document that is going to spell out the rules for how the property in the trust should be handled.

This can be an especially smart move if you are a small business owner and you created the business prior to the marriage.

There are many different kinds of trusts, and in a situation such as that, you may consider the establishment of a domestic or foreign asset protection trust. What this would allow you to do is transfer ownership of your separate property – say, your business – into this separate trust. What this does is protect it from any sort of divorce settlement because technically, it's not yours – it belongs to the trust.

However, if this was a business you built together, you may not have the option of creating a separate trust to keep your spouse from their share of the enterprise. The laws vary.

Some other types of property that may be considered separate, and therefore not subject to consideration in your divorce settlement: 

  • Property that you owned prior to your marriage;
  • An inheritance you may have received (regardless of whether it was obtained before or after the marriage);
  • A personal injury payment that you received for some type of pain and suffering;
  • A personal gift you received from a third party (for example if your mother gave you a diamond bracelet).

Other types of property, such as a 401k or stock options, can still be subject to division in a divorce, even if it's only in one spouse's name. In fact, even if you had property prior to the marriage, but then later added your spouse as a co-owner, it's likely to be considered marital property. Same thing if you received some sort of financial gift, but then deposited into your joint account.

Now let's say the situation is reversed, and it is your spouse who holds the trust. This may not entitle you to those assets, but you could petition the court to calculate alimony or child support payments based on the inclusion of the contents of that trust.

Every situation is going to be different.

If you aren't sure about whether to establish a trust, whether your trust may be protected or if you are entitled to the contents of your soon-to-be-ex's trust, contact an experienced divorce attorney.

If you are contemplating a divorce in Birmingham, contact Birmingham Family Law Attorney Steven Eversole at (866) 831-5292.

Additional Resources:

Can a Trust Protect My Assets in a Divorce? By Jeff Landers, Forbes

About the Author

Steven D. Eversole

J.D., Samford University's Cumberland School of Law, Birmingham, Alabama B.A., University of Alabama, Tuscaloosa, Alabama


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