Whether you receive income from a trust fund or placed assets into a trust during your marriage, how that trust will be handled upon your divorce depends largely on when the trust was created and how the funds are used. Florida distinguishes between property that is the separate property of one spouse and the joint property of both spouses. Depending on how the court treats your trust in the divorce, you may have to split proceeds from the trust with your spouse.
Florida is an equitable distribution state. This means a divorce court will divide marital property between spouses in a manner that is fair and just, though not necessarily equal. Marital property is property acquired by either spouse during the marriage, with the exception of property received by one spouse by inheritance or gift, which remains the separate property of that spouse. Separate property is also property acquired by one spouse before the marriage. Generally, Florida courts only have authority to distribute marital property between spouses in divorce.
Under Florida law, any inheritance a spouse receives during marriage, such as money from a trust, is considered that spouse's separate property and not divisible in a divorce. However, what a spouse does after receiving that money may change its character from separate property to marital property, thereby making it divisible in divorce. This happens in one of two ways. If the spouse mixes the funds with marital money, known as commingling, to the point where the two become indistinguishable, it may lose its character as separate property. For example, when a spouse places inheritance funds into a joint bank account where marital funds are also deposited, then pays family expenses with the money. Separate property may also change into marital property if a spouse deliberately changes its character, known as transmuting. For example, when a spouse uses inheritance funds to buy a home then adds the other spouse's name to the title.
Trusts During Marriage
It is not uncommon for spouses to open various accounts during marriage, including trusts, and deposit funds into those accounts throughout the course of the marriage. Florida considers such accounts to be the marital property of both spouses, thus divisible upon divorce. The court will evaluate a variety of factors when deciding how to best divide a trust between spouses, including the length of the marriage, economic circumstances of each spouse and contributions each spouse made to the marriage. If a spouse transfers marital funds into a separate trust in which he is the sole trustee, effectively preventing the other spouse from accessing the funds, the court may treat this action as an attempt to hide or dissipate assets and award more property to the other spouse as a result.
People often create trusts for the benefit of another. A great example of this is the spendthrift trust, which is typically used to provide for the maintenance and support of another person. Minors, incompetent individuals and people with poor spending habits are common beneficiaries of spendthrift trusts. Spendthrift trusts are unique in that the beneficiary does not have access to the funds and cannot transfer his interest in the trust because the spendthrift trustee controls when distributions are made and the amounts. As a result, trust assets are protected from creditors until distributions are made. However, this is not the case with divorcing spouses. In Florida, spouses are deemed "exception creditors." This special status gives them a claim to assets in a spouse's spendthrift trust if the court establishes a domestic support obligation, such as alimony or child support.