Saturday, February 28, 2015
While marriage can be wonderful, it can also be difficult. Unfortunately, some couples encounter hurdles in their relationship from which they may never recover.
Regardless as to whether the split is acrimonious or harmonious, leaving trust assets on the table during negotiations can enable the parties to make beneficial deals that will protect family business interests or other assets from division. The goal should be to plan for divorce with flexibility to maximize a divorcing couple’s options, while also protecting what divorcing settlors would want.
A big concern is that the settlor in the divorce action will not want their spouse to automatically continue as trustee or beneficiary with no safeguards. A refined solution involves two provisions: First, upon the filing of a divorce action, the trust instrument default should automatically remove the spouse as trustee appointer and trustee remover only. That way, a successor in line can remove the spouse as trustee if that’s desired. The spouse can also remain as fiduciary if appropriate. Second, someone should be empowered in the instrument to exercise a power to add or remove beneficiaries like a divorced spouse. This combined approach can achieve all that most divorcing clients would want without limiting flexibility for the minority of clients whose divorce wishes may be atypical.
See Kim Kamin, Planning for Divorce When Drafting a Trust, Wealth Management, Feb. 27, 2015.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.