Trusts and Divorce: Common Mistakes to Avoid

Getting married or divorced brings up a lot of questions about your future—and your money. If you’re wondering how a trust fits into the picture, you’re not alone. Many people set up trusts to protect what they’ve built or to pass things down to family. In this article, you’ll learn how trusts and divorce are related and how to avoid common mistakes.

How Does Divorce Affect a Trust?

When it comes to trusts and divorce, the type of trust you have—and how it was funded—can make a big difference. Courts may treat assets held in a trust similarly to other property, depending on when the trust was created, how it was funded, and how the assets were used during the marriage. An estate planning attorney can look at your specific situation, but here’s how different trusts generally work in a divorce.

Revocable Living Trusts

A revocable living trust can be changed or canceled at any time. If you didn’t sign a prenup, the court will likely treat assets in this kind of trust the same way it evaluates other property, focusing on whether the assets are marital or separate property.

Marital property is anything you or your spouse got while married, like a house or retirement account. But if you made the trust before your marriage or used only your own separate property to fund it, it may stay yours. Courts will look at the source of funds and whether any trust assets were used for joint benefit, such as paying shared bills.

Marital Trusts

A marital trust, such as an AB trust or Qualified Terminable Interest Property (QTIP) trust, is usually set up to help a surviving spouse while also protecting assets for children or other heirs. These trusts are often used for estate tax benefits and to keep some control over where assets go after both spouses pass away.

It’s common for spouses to create separate revocable trusts during marriage and name each other as the main beneficiary. The good news is that those beneficiary terms are easy to cancel after a divorce. Just update the trust documents to reflect your new wishes and avoid confusion later.

Irrevocable Trusts

An irrevocable trust is final once it’s created. You generally can’t change it, and courts are often limited in their ability to divide the trust itself. That makes it very hard to divide the trust in a divorce. However, courts may still consider the income from an irrevocable trust when calculating alimony or child support, even if the trust itself isn’t divided.

Inheriting a Trust

If you inherited money or property through a trust during your marriage, that inheritance is typically considered separate property. That means the court likely won’t divide it in a divorce.

However, if you mix that inheritance with marital property—like putting it in a joint bank account or adding it to a new trust with mixed assets—it could become marital property. This is called "commingling," and once it happens, a judge may decide to split it during the divorce. It’s often difficult to reverse, so it’s important to keep inherited assets clearly separate.

Trusts and Divorce: 5 Common Mistakes

Whether you're getting ready to marry or split up, how you set up a trust can make a big difference. If you want to protect yourself, your kids, or your assets, you need to avoid these common mistakes.

Choosing the Wrong Trust Type

Not all trusts do the same thing. Some are better for protecting property during your lifetime, while others focus on what happens after you pass. If you set up the wrong kind of trust, your assets may be easier to divide in a divorce. Talk to a lawyer to find the trust that actually fits your goals.

Skipping Appraisals

If the property in your trust will be divided during the divorce, it’s important to get it reappraised.

Assets like real estate, retirement plans, or business shares can change in value, and if you skip getting those assets appraised, you could end up with an unfair settlement. You need to know what everything is worth, even if it's inside a trust. That way, you can argue for a fair division of property.

Creating a Trust That Isn’t Specific Enough

If your trust isn’t clear about who owns what and how it should be handled in a divorce, things can get messy fast. A good trust can help clarify the source and intended use of assets, which may support arguments about whether property should be treated as separate or marital. When a trust leaves too many questions open, it’s easier for someone to challenge it in court. Writing it the right way from the start can prevent future fights.

Failing to Make a Trust for Your Children

Divorce can change your whole financial picture, especially if you have kids. If you want your children to receive certain assets no matter what happens with your ex, you’ll need a trust built with that in mind. This can stop future spouses or stepfamilies from getting control of what you meant for your kids. It also helps avoid confusion or disputes down the road.

Trying to Hide Assets in a Trust

While an asset protection attorney may be able to help you set up a trust to protect your assets from things like estate taxes and lawsuits, it’s usually not a good idea to hide assets during a divorce. If a court finds out you did this to avoid sharing marital property, it can block the transfer or impose penalties on the trust and even punish you. Judges don’t like it when people try to be sneaky. Being honest and working with a lawyer is always the smarter move.

Not Updating Your Trust

Big life changes—like getting married or divorced—mean it’s time to take another look at your trust. If your trust still lists your ex-spouse as a beneficiary, they might end up with property you no longer want them to have. You should also check if your trustee is still the right person to be in charge. Keeping your trust up to date helps make sure it still fits your life.

Consult an Attorney About Trusts and Divorce

Divorce and estate planning often overlap in ways people don’t expect. Whether you're planning for the future or going through a split, the way your trust is written—and when it was made—can change everything. A lawyer can help you understand your options, protect your property, and update your documents so they reflect your current wishes.

If you’re ready to take the next step, contact Plan Ahead Legal. We’re here to help you build a clear path forward.