Family Trusts and Family Breakdowns – Understanding Asset Pool Inclusion
Family trusts can significantly impact asset division during family breakdowns, such as divorce or separation. Understanding how family trusts are treated in these situations is crucial for individuals navigating such challenging circumstances.
Role of Family Trusts
Family trusts are legal arrangements that hold assets on behalf of beneficiaries, managed by trustees according to the trust deed’s terms. They are commonly used to protect and manage family wealth, provide for beneficiaries, and potentially minimize tax liabilities.
Treatment of Family Trusts in Divorce
Control vs. Ownership: In Family Law, the distinction between control and ownership of trust assets is pivotal. While trustees control trust assets, beneficiaries (including spouses) may benefit from income or distributions, influencing their treatment in divorce settlements.
Inclusion in Asset Pool: Family Courts may consider trust assets as part of the asset pool available for division, especially if:
- Beneficial Interest: A spouse has a beneficial interest in trust assets or benefits directly from trust income or distributions.
- Control or Influence: One or both spouses have significant control or influence over trust decisions, such as trustee powers or discretionary distributions.
- Complexity of Trust Structures: Trusts with complex structures or significant assets can complicate asset division, requiring expert evaluation of trust deeds, roles, and distributions.
Factors Influencing Division
Several factors influence how family trusts are treated in asset division:
Trust Deed Provisions: Specific terms of the trust deed regarding beneficiary entitlements, discretionary powers, and trustee obligations.
Contributions and Needs: Each spouse’s financial contributions during the marriage, including contributions to trust acquisition or maintenance, and future needs (e.g., housing and income requirements).
Legal Advice: Seeking advice from a family law specialist and potentially a trust lawyer is crucial. They can provide insights into trust law, assess trust complexities, and advocate for equitable outcomes.
Protecting Trust Assets
To protect trust assets during potential family breakdowns:
Trust Management: Adhere strictly to trust terms and avoid commingling trust assets with marital property.
Documentation: Maintain comprehensive records of trust activities, distributions, and financial transactions.
Legal Counsel: Consult with legal professionals to review trust structures, deeds, and potential impacts on divorce proceedings.
Conclusion
Family trusts play a significant role in asset division during family breakdowns, requiring careful consideration and expert guidance. By understanding the treatment of family trusts in divorce settlements and proactively protecting trust assets, individuals can navigate these complexities with clarity and ensure fair outcomes.
At Ahern Sierakowski, our team specializes in family law and trust matters. Contact us today to schedule a consultation and receive personalized advice on protecting your assets and navigating family trust issues during challenging times. We are committed to helping you achieve a secure future with peace of mind.
