Revocable Trusts and Splitting Assets in Illinois Divorce Cases

 Posted on June 09,2016 in Division of Assets

How property is split in an Illinois divorce case may sound relatively simple initially. Anything that you come into the marriage with and keep separate is non-marital property that you get to keep after a divorce. Anything that is commingled with your spouse or that you and your spouse purchase together is marital property that you will have to negotiate how to split, or follow the decision of the court.

There are, however, always complications to rather simple laws. One of the more confusing areas of Illinois divorce law involves revocable trusts.

What Is a Revocable Trust?

Often used for estate planning or tax benefits, revocable trusts (also known as living trusts), are created when someone in possession of property (the grantor) puts the asset in the possession of a trust, which is managed by a trustee, to hold it for a third-party (the beneficiary). Trusts are often used to transfer inheritances without going through probate court. Both cash and tangible property such as real estate or vehicles can be held in a revocable trust.

How Revocable Trusts Are Treated By Divorce Courts

Since a former spouse is not entitled to non-marital property that is kept separate from the marital estate, a former spouse is typically not entitled to any income or principal from a trust unless the former spouse was also named as a beneficiary to the trust. The exception to this rule usually comes up if the beneficiary of the trust takes income received from the trust and commingles it with marital assets. Once that money is no longer held separately, it becomes a marital asset, and is subject to distribution by a court, just like a home or vehicle that a married couple purchases together.

In some cases, a trust is initially founded by marital assets. If this is the case, the trust may be revoked at the time of the divorce, and the assets will be distributed evenly.

Sometimes one spouse will create a revocable trust for the benefit of the other spouse. Again, this is useful for estate planning. However, if such a trust exists at the time of a divorce, the trust will automatically be revoked under Illinois law.

Finally, it is worth noting that trusts do not change how a court will decide the issue of child support. A court takes all income into account when ordering a parent to pay child support. Any income from a trust is calculated just the same as income from a full-time job.

Contact an Experienced Illinois Divorce Attorney

Dividing assets is often the most contentious part of a divorce case. While you may want your fair share of the marital property, you also need to ensure that your property rights are protected as well. An experienced Illinois divorce lawyer can make all the difference in how property is split in the course of a divorce. Contact our office today for a consultation with a compassionate DuPage County family law attorney about your case.

Sources:

http://www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning/revocable_trusts.html

http://ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2123&ChapterID=61