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Can a trust protect your finances in divorce?

Trusts are usually only talked about when they're being designed for passing down inheritances or assets to beneficiaries, but they have a number of purposes well before anyone passes away. A trust is a way to protect your family's assets, and creating a trust could even protect your funds from a failing marriage.

Imagine having a trust as a young adult. That trust is separate from your bank account, but you still have access to it. When you get married, you don't combine that income with your spouse's income. Instead, you leave it in the trust fund and access funds only when you need them.

Years later, your spouse decides that he or she wants to get a divorce. Now, he or she would like to get part of the trust, but that's not going to be a concern for you. Since you never mixed your assets, your finances are protected.

It's because of this benefit that many parents now place their children's funds into trusts. They're protecting their children's funds, and their hard-earned money, from division in the case of a divorce. In some cases, these trusts can be worth millions, so taking the time to designate a beneficiary and protect that trust from becoming marital property is vital.

If you have a trust, remember that any funds you mix with your own shared accounts will be divided as marital assets in most cases. It's safer to keep your trust separated and to make sure to protect what you've inherited. These are your personal assets, and your spouse does not have legal assess to them as long as they are not in a shared account.

Source: Kiplinger, "A Trust Can Protect Your Adult Child’s Assets from a Failed Marriage," Lisa Brown, accessed May 08, 2017

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