Dear Moneyist,
My spouse created a revocable trust two months before our marriage without my knowledge. He placed all of his money in the trust fund. We are now getting a divorce. Am I entitled to any of his assets? Or not?
He also bought an investment property, supposedly with his trust fund, a month after marriage without my knowledge (his mom co-signed), and bought another investment property with his mom before marriage. I am the only one on the deed of the house we currently live in.
Soon-to-be ex-wife
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Dear Soon-to-be ex,
In an equitable-property state, a divorce court is under no obligation to divide property 50/50, but generally assets brought into the marriage are treated as separate property. In a community-property state, any assets acquired during the marriage are deemed marital property and divided 50/50. In a community-property state, gifts and inheritance are not regarded as marital property and, therefore, not divided equally in a divorce.
Your family home is considered community property if it was purchased during the marriage, and/or if joint funds were used to pay the mortgage or for the upkeep of the property regardless of whose name is on the deed. However, in an equitable-property state, the divorce court may take your husband’s own financial activities and/or behavior into account when splitting the assets. If you purchased this property prior to the marriage, it will remain yours and yours alone.
“There are exceptions in which some of your husband’s assets/funds could be considered community property.”
There are exceptions in which some of your husband’s assets/funds could be considered community property, Kyle Hafstad, estate planning adviser at Exencial Wealth Advisors, told MarketWatch. “In some community-property states, though the asset/property itself is considered separate property, the income from the investments/assets (including a rental property) are considered community property.”
“If the income, deemed community property in this situation, was then used to purchase the investment property during the marriage, then all or part of that investment property may be considered a community property asset,” he adds. “Often the courts will take a spouse’s separate property into account when dividing the community-property assets, meaning that one spouse may end up receiving more than 50% of the community-property assets during a divorce.”
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Such commingling is always a risk. According to Long, Murphy & Zung, a law firm in Naples, Fla., “one of the most common reasons exes lay claim to trusts belonging to their spouses is because assets were pulled out during the marriage and commingled with the couple’s finances.” The firm adds, “Trusts work very much like any other asset does in a divorce.” If your husband owned it prior to the marriage, it remains separate property. Florida is an equitable-distribution state.
Your husband is subject to the same rules as everyone else. Koons Fuller, a law firm in the Dallas/Fort Worth area, breaks it down this way: “You can determine if a house is community property or separate property using the following rules: A house purchased during marriage is presumed to be community property. A house owned before marriage is separate property, as is a house inherited or received as a gift.” Texas is a community-property state.
“Your husband is either a cautious man or, to put a more skeptical spin on it, he believes that marriage is the first step towards divorce.”
Your lawyer will help you navigate the finer details in your state and marriage. Generally, secrets do not bode well for a spouse’s confidence in a marriage. Some are worse than others. I have received many letters where one or both spouses write a secret will; one woman said her husband, who had a monthly income of $8,000, sent his mail to a P.O. box to hide his finances. One silver lining here: Your husband’s actions seem less egregious compared to that.
He is either a very cautious and meticulous man or, to put a more skeptical spin on it, he believes that marriage is the first step towards divorce. Setting up this trust in secret did not bode well for his trust in the marriage itself. Ditto buying an investment property with his mother without telling you. I suggest you were dealing with an unknown quantity from the very beginning, and I’m talking about your husband here, not the total value of his assets.
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