We receive questions all the time from clients and prospective clients regarding whether certain assets or property will be subject to division in divorce. Unfortunately, when it comes to questions surrounding whether a spouse will be able to access a trust in divorce, there is no quick and straightforward answer. The division of property in Indiana depends greatly on the facts and circumstances of each case. However, there are some uniform concepts and rules that will help give you an idea of how the trial court will treat an irrevocable trust during divorce. In this blog, we provide a brief overview of how property is divided in Indiana, and when your spouse may be able to access your irrevocable trust in divorce.
In divorce cases, it is well established in Indiana that all “marital property” goes into the marital pot for division. Marital property is property owned by either spouse, regardless of if the property was acquired before the marriage or during the marriage. Nor does it matter if the property is titled in only one of the spouse’s names, or if it is jointly titled. All property is presumptively marital property. Importantly, Indiana’s “one-pot” theory prohibits trial courts from excluding any asset in which a party has a vested interest.
However, as our Court of Appeals has explained, despite the broad definition of marital property, some property interests are still considered too remote to be assets capable of division.1 Therefore, when it comes to irrevocable trusts, the first step in determining whether it will be included as marital property is to determine the interest you have in the irrevocable trust.
For example, say you are the beneficiary of an irrevocable trust created by your parents, and your parents are still alive. But, in order to receive your benefit from the trust, you have to survive your parents. Under this example, the irrevocable trust would probably not be considered marital property because your interest in receiving the benefit of the irrevocable trust is conditioned on an event, (i.e., outliving your parents), which may not happen. Therefore, because of this condition, your interest in the irrevocable trust may be considered “too remote.” In contrast, for example, say you are the beneficiary of an irrevocable trust, but you are already receiving the benefit of the trust. Under this example, the irrevocable trust will properly be considered marital property because of your present interest to the benefit of the trust.
These types of situations are extremely fact-sensitive, and the above information is general in nature. Divorces are emotional times for all involved. Not only are they emotional, but oftentimes complex, especially when it comes to property division and trust assets. Obtaining skilled counsel is key to relieving some of the burden that comes with divorce. This blog was written by attorneys at Dixon & Moseley, P.C. who handle estate planning and divorces of all types throughout the state. It is written and posted for general educational purposes and is not to be construed as legal advice or solicitation for services. It is an advertisement.