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Are Assets in a Revocable Trust Marital Property in Divorce?

When you and your spouse are working out the division of marital assets, you may come across the question of whether family trusts are subject to equitable division under Colorado law. The short answer? Like all things involving divorce and money, it’s complicated. Here is a basic overview of the situation.

Revocable vs. Irrevocable Trusts in Divorce

Irrevocable trusts are trusts that have terms that cannot be changed. Irrevocable means no take-backs ”“ even in a divorce, the original terms of the trust still stand. This can give a beneficiary of an irrevocable trust an enforceable right to the assets contained within the trust. If one divorcing party has an interest in an irrevocable trust, that interest could be considered marital property.

If the trust is revocable, this means that the “settlor” ”“ the person who created the trust ”“ can revoke the trust or beneficiary’s interest at any time. If a spouse is a beneficiary to a revocable trust, it is possible for the settlor to revoke that trust and thus cause the spouse to lose his or her interest. Therefore, an interest in a revocable trust may or may not be considered property subject to division in divorce.

As you can see, none of this is black and white! Furthermore, many trust interests are granted from parents to children. If the parent of a married spouse grants a future interest to only one spouse, it is entirely possible that the interest in the trust could be considered separate property and thus immune from equitable division. This can happen when a trust is created before marriage, or even if the trust was a gift to one of the spouses during marriage.

If you are unsure of how to go about protecting your assets or trusts in a Colorado divorce, speak to a family law attorney in Colorado. The legal team at Divorce Matters has the skills and resources to answer your questions and get you the help you need.