When a marriage ends, the emotional toll is rarely the only challenge. Financial complexities often loom large, particularly when trusts are involved. Whether you’re the grantor, trustee, or beneficiary, understanding how trusts intersect with divorce can make the difference between protected assets and unwelcome surprises. Let’s unpack some key considerations in plain English, minus the legalese, and explore how different types of trusts can affect your divorce outcome.
Are trusts always off the table in divorce?
The first thing you should know is that trusts aren’t immune from divorce proceedings. Courts will look at whether the trust is marital property, separate property, or somewhere in between. If a trust was created before marriage and funded with separate assets, like an inheritance, and kept separate, it may stay untouched during divorce. But if it was funded during the marriage, managed by a spouse as trustee, or used to support marital lifestyle, it could be counted as marital property and subject to division. That means even a carefully crafted trust can be disrupted especially if it’s intermixed (i.e. commingled) with marital funds or the settlor retained significant control.
Revocable trusts vs. irrevocable trusts
Before we go any further, let’s clear up a common point of confusion. What’s the actual difference between a revocable trust and an irrevocable one? Think of a revocable trust like a flexible savings jar. You can put assets in, take them out, change the rules, or even smash the jar entirely if you want. It’s fully within your control. This is also why courts often treat a revocable trust as part of the marital pot during divorce. An irrevocable trust, on the other hand, is more like dropping your assets into a vault and handing someone else the key. You can’t easily change it, access the assets, or take it back. That loss of control is what gives it stronger protection in divorce. Since it’s no longer technically “yours,” it is harder for a judge to divide. But, as we’ll get to in a moment, not impossible. The lack of control involved also means that an irrevocable trust is not something you enter into lightly. Choosing between the two involves considering your personal goals, your legal strategy, your need for control over your assets, and your relationships.
Revocable trusts and divorce
Revocable trusts are flexible, and that’s a double-edged sword. Because the grantor usually maintains full control and benefits from the trust while married, courts typically view its assets as marital property. In a divorce scenario, any assets funding a revocable trust during marriage could be fairly divided and the trust amended or dissolved as part of the settlement. The word often used to describe when separate assets intermix or blend with marital assets is “commingled.” Courts are highly likely to view a revocable trust as having commingled with the marital estate.
Irrevocable trusts and divorce
Irrevocable trusts are far more protective, but they’re not bulletproof. Once assets are placed in an irrevocable trust, the settlor generally loses control, which can keep those assets off the marital table. In many cases, such trusts remain intact through divorce. However, if the spouse managed the trust, used its distributions for joint living expenses, or was named executor or beneficiary with access to assets, a court might still classify distributions or income as marital. Strategic drafting can minimize these risks, but nothing is full-proof. When it comes to spousal support (aka “alimony”), courts can consider an irrevocable trust depending on how much control or benefit the spouse has over the trust. Even though an irrevocable trust is technically no longer “yours” once it’s established, if you still receive income from the trust, or if the trust is being used to pay your bills, buy your groceries, or fund your lifestyle, a court may treat those distributions as part of your available resources when calculating support obligations.
Courts can pierce the veil when equity demands it
Some landmark cases show how courts may reach into trusts if they believe they’re being used to hide assets or avoid financial responsibility. For example, the 2015 Massachusetts case of Pfannenstiehl v. Pfannenstiehl, a husband’s beneficial interest in an irrevocable trust was deemed marital after the trust’s assets were used to support family life. The husband in this case also appeared to have orchestrated asset shielding by abruptly stopping distributions from the trust just before filing for divorce (Pfannenstiehl v. Pfannenstiehl (2015)).
Similarly, New Hampshire trusts have been treated as marital when the spouse had control over distributions. In the 2021 case of Matter of Bournival, the New Hampshire Supreme Court took a close look at a husband’s interest in two discretionary, third-party trusts created by his parents. On paper, these trusts seemed hands-off, but in reality, he was practically running the show. He chose investments, his family accountant served as a trustee who almost always followed his wishes, and distributions were made at his direction. The court noted that the trusts did not appear to be fully independent “discretionary” trusts because he had so much control over them. The trusts were deemed marital property and distributed during the divorce.
What this means is simple but powerful: if a spouse de facto controls trust assets, even one that’s labeled “discretionary” or “spendthrift,” courts may reach into it during divorce. And while the principal might remain shielded, any real influence or benefit that tied back to marital finances can be considered fair game. Additionally, if a trust serves dual purposes like an asset shelter and a financial lifeline to marriage, courts may deem the trust as marital property and distribute it in a manner they deem fair during divorce proceedings.
Income counts even if principal doesn’t
We touched on distributions above, but it’s important to understand that for both revocable and irrevocable trusts, distributions could be seen by a court as income meant for the family. Even when a trust’s principal remains untouched, distributions often matter. Say a spouse receives $5,000 monthly from trust income during divorce. That might be considered income for alimony or child support purposes, even if the trust’s assets remain out of reach.
Estate planning post-divorce
Divorce doesn’t just dissolve marriages, it dissolves plans, too. If your spouse was a beneficiary or trustee, then you need to update your trust documents as soon as possible. Otherwise, your ex might still have legal influence or rights to your trust. Some trusts may even need to be dissolved or restructured entirely if they no longer reflect your new roadmap. If a divorce is on the horizon, talk with an estate planning attorney to figure out what steps you should take to prevent financial confusion and financial strain in the aftermath of a divorce.
Prenups, trusts, and predictability
When it comes to a divorce, you’re not always at the whim of a judge. There’s a step you and your partner can take before even getting married to ensure that your financial futures are planned out and protected. A prenuptial agreement can save the day when it comes to how a trust is classified. Prenups can explicitly define how trust assets are treated during divorce. You can agree that a particular irrevocable trust remains separate property, or define whether revocable trust assets are shared. Prenup protections add a significant amount of clarity giving couples a peace of mind. In Texas, for instance, trusts funded before marriage but used during marriage could still be considered community property unless a prenup says otherwise .
Tips for trusts in and after divorce
Be intentional and smart when navigating trusts during divorce. Here’s some advice on how to keep your trusts classified in the way you want them to be.
- Keep premarital trusts clean – Don’t add marital funds to the trust and don’t name your spouse as trustee. Also, be careful not to use funds from the premarital trust to finance any aspect of the marriage.
- Separate trust administration – If your spouse benefits, keep income distributions clearly defined.
- Plan ahead – Use a prenup or amendment to designate which trusts, and which assets within them, are separate.
- Review your documents after divorce – Update beneficiaries, trustees, and instructions promptly.
- If you have minor children, be sure you know how to create protections in any new or restated trusts if you don’t want your ex-spouse to have control over the assets that you leave to your kids.
- Know your jurisdiction – Some states are more likely to honor separate trusts while others are aggressive in recasting them.
Bottom Line on trusts and divorce
Trusts can be powerful shields for your separate property. But in a divorce, courts will scrutinize how you treated a trust during the marriage, and the separate property classification can crumble if the funds in the trust are used in the marriage. Revocable trusts are convenient and allow you to manage funds throughout your life, but a separate property classification is not likely to hold during marriage. Irrevocable trusts, on the other hand, offer more protections from taxation and creditors but don’t allow regular management of the funds. The assets in an irrevocable trust are more likely to maintain their separate property classification, but this classification could be challenged if you play too significant a role in the maintenance of the irrevocable trust during the marriage or if the distributions from this trust are used for marital purposes. When it comes to trusts, the best protection is intentional treatment of the assets during marriage and a prenuptial agreement that uses plain language to classify the trusts in the way you and your partner desire.
Suzanne specializes in helping families plan for their futures, from the prenup stage through the trust and estate planning stage, so that families can have peace of mind and confidence knowing that they’ve protected what they love the most.
Suzanne is an experienced attorney with specific, specialized expertise in family law, estate planning, and criminal and civil litigation. She has been practicing law for 16 years and truly enjoys serving her clients at the highest level.
Suzanne knows that every family situation is unique, and she is passionate about creating a plan and designing a prenup that works to protect you, your future, and your family.
Suzanne lives with her family in Tucson. When not in her legal zone, Suzanne loves outdoor running, all things fitness, spending time with her kids, and traveling. Disney is a top favorite!
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