Say I set up an irrevocable trust in my child’s name only, and buy real estate property, stocks, and bonds using income from my business to transfer into this trust.
During a divorce, would my spouse be able to claim 50% interest in this irrevocable trust?
What if I set up an irrevocable trust in my parents’ names only, and also bought investment assets for this trust using business income? Would the spouse be able to claim interest in this irrevocable trust?
I am not licensed to practice law in your jurisdiction, but I can provide you with a general answer to your property division question.
Whether your wife has an interest in these trusts will depend on their formation. In my jurisdiction, all income between the parties is considered marital and there is a presumption that the marital estate is divided equally upon dissolution of the marriage.
If one party is liable for “marital waste” by unjustifiably or negligently depleting the marital estate of assets, the other party may be entitled to a disproportionate amount of the remaining estate.
In your case, the issue is how the court will construe the marital estate. These trusts were created for the benefit of other family members but the trust was created with marital income (your business income) and marital assets (i.e. stocks, bonds, real estate).
If the marital income and assets were used in any other manner, your wife would certainly have an interest claim.
If the court determines (or you agree) that this property is now outside the marital estate, neither you nor your wife have a claim to the property. In a sense, it’s already been gifted away.
If your wife will not agree that this property is no longer part of the marital estate, I think your battle comes down to the circumstances surrounding the trusts.
When were they created? Who is the settlor? Did your wife agree? Were the trusts funded immediately before your divorce action or in contemplation thereof?
If the trusts were created a long time ago and with your wife’s consent, or systematically contributed to over the years, your argument that the property is non-marital is stronger.
If all the property was put into a trust to put it out of your wife’s reach, she could argue that you unjustifiably depleted the marital estate.