Protecting inheritances and trust funds in a Lexington divorce can be one of the most challenging aspects of ending a marriage in Fayette County, KY. This complex intersection of wealth management, estate planning, and family court is subject to all sorts of legal nuances.

Some bad-faith ex-spouses might even try to use these gray areas to lay claim to personal, non-marital funds that do not rightfully belong to them.

With nearly 3 of every 1,000 Kentucky residents experiencing divorce in any given year, Fayette County enjoys a median income of almost $100,000. This is significantly higher than the state average.

It’s good for married folks in Lexington to think about protecting their wealth, their rights, and their future, even if divorce feels like an impossibility today. Most high-income individuals have experienced enough ups and downs to understand the value of preparation.

If you are going through a divorce in Fayette County, you might feel anxious about the future of your personal wealth. It could include an inheritance from your parents or a trust fund established after you were already separated.

In these cases, you may wish to hire a trust lawyer, or at least consult one. Better yet, contact Stange Law Firm, PC for a competent, assertive, full-service divorce lawyer who understands sophisticated estate planning tactics.

Understanding Revocable Trusts in Kentucky

A trust is a tool that straddles the line between a financial instrument and an estate planning document. Like a bank account, you can store assets in a trust. You can use a trust to disburse those assets to heirs and beneficiaries after your death or when other conditions are met. And, like a corporation or estate, a trust is almost its own distinct legal entity.

A revocable trust is a type of trust that you can revoke or change at any point during your lifetime. This makes it more flexible and adaptable than some other types of trusts. It’s also an ideal tool for people with frequently changing financial or familial circumstances.

Some of the reasons people choose to use a revocable trust as the basis of their estate plan include:

  • Flexibility: A revocable trust can be changed or revoked as needed during your lifetime, making it less permanent than other options.
  • Avoid probate: Assets placed into trust are usually not subject to the tedious probate court process that automatically goes into effect when someone passes away.
  • Customization: A revocable trust allows you to put a great level of detail into disbursement instructions. For example, you could set up a scholarship trust that does not pay out unless your grandchildren enroll in a particular college program, or a trust that pays your heirs out in increments over an extended period.

Revocable Trusts in Kentucky Divorces

Lots of Kentucky’s wealth is concentrated around Lexington. Companies like Xerox, Lexington VA Medical Center, and the University of Kentucky bring income and jobs to the area. Due to this influx of resources, trust laws have become a topic of interest to many local families.

Like any other type of asset, the court will need to determine whether the trust is a marital asset or a privately-held asset belonging to one spouse or the other. The very nature of trusts can make this process more difficult, as they are their own distinct legal entity.

What it usually comes down to is where the entrusted assets come from and when. If a trust was established with marital property, then the trust will likely be subject to division as part of the divorce proceedings. If it was established with one party’s rightfully held personal funds, however, then that trust should be left out of the divorce proceedings.

Examples of trusts that may be considered jointly-owned marital property by a Kentucky court include:

  • A large cash wedding gift that has been converted to a revocable trust
  • A trust that has been funded by both partners’ contributions over time
  • A trust funded by one spouse’s lucrative earnings that were gained while the other spouse was caring for the household and children
  • Any other type of trust wherein the entrusted assets could be reasonably considered to be the joint marital property of the couple.

FAQs

Can a Trust Protect Inheritance from Divorce?

A trust cannot protect inheritance from the division of marital property in a divorce. However, inheritances are often the sole property of a single individual and therefore not considered marital property in the first place. It all depends on when the inheritance was received, whether the inheritance has been used as a joint marital asset, and the details of the legal instrument used to bequeath the inheritance.

Can a Trust Fund Be Touched in a Divorce?

Yes, a trust fund can be touched in a divorce, despite offering certain powerful protections for entrusted assets. This is especially true if the trust was set up in a bad faith attempt to hide marital assets during a divorce or immediately before filing for divorce. Such tactics may even result in additional penalties beyond the entrusted assets being divided.

What Money Can’t Be Touched in a Divorce?

There is no money that can’t be touched in a divorce. This is because any asset could potentially be deemed as marital property depending on the circumstances. Hiding assets by placing them in secret accounts is also illegal. It is important to work with a divorce attorney to protect as many assets as you can during a divorce.

How to Protect an Inheritance from a Divorce?

You can protect an inheritance from a divorce by demonstrating that it is your own personally-held property and not a joint marital asset. This can be done by providing documents that prove you received the inheritance before you were ever married, or after you had already been legally separated. If you are worried about protecting your inheritance in a high-value divorce, speak with a trusted attorney for personalized advice specific to your circumstances.

Hire a Trust Lawyer to Protect Your Assets

If you’re unsure whether your entrusted assets are at risk from your divorce, or want to know whether putting assets in trust may be a viable way to protect them, please don’t hesitate to contact Stange Law Firm, PC for help. Our knowledge of Kentucky family courts makes us ideally positioned to help Kentuckians with these complex questions.