Divorce is a complex and emotionally charged process, especially when it involves the division of assets and finances. Wisconsin operates under the principle of equitable distribution, which means that the court aims to divide marital property and assets in a manner that is fair, rather than equal. However, when trusts enter the picture, the division process becomes even more intricate and nuanced. This article serves as an overview of Wisconsin’s divorce laws, shedding light on how trusts are handled during property settlements.
Understanding Marital Property vs. Separate Property
Before delving into the division of trusts, it is vital to grasp the distinction between marital property and separate property. Marital property encompasses assets and property obtained during the course of the marriage, while separate property encompasses assets acquired before the marriage or through inheritance or gift. Wisconsin law dictates that marital property is subject to division during a divorce, whereas separate property is exempt.
Unpacking Trusts
A trust, by definition, is a legal arrangement in which a trustee holds and manages property or assets on behalf of a beneficiary. Trusts can serve various purposes, including safeguarding assets from creditors, bypassing probate, and providing for beneficiaries after the grantor’s demise.
The Intricacies of Trust Division
In Wisconsin, a trust may be deemed marital property if it was established or funded during the marriage, or if both spouses contributed to it. If a trust falls into the category of marital property, it will be subject to division during the divorce proceedings. However, any trust assets that are considered separate property, such as those obtained prior to the marriage or through inheritance, will not be subjected to division.
Factors Considered in Division
When it comes to dividing a trust, the court takes into account several factors to determine the most appropriate division of assets. Some of the elements considered include the duration of the marriage, the age and health of each spouse, the contributions and sacrifices made by each spouse during the marriage, the earning capacity and income of each spouse, the education and training of each spouse, any tax implications resulting from the division, the value of each spouse’s separate property, the standard of living during the marriage, and any prenuptial or postnuptial agreements.
Types of Trusts
In a divorce settlement, several types of trusts may come into play. The following are some of the most common trust types involved:
Revocable Living Trusts – A revocable living trust permits the grantor to change or revoke it during their lifetime. As the grantor retains control over the trust, it is typically considered marital property.
Irrevocable Trusts – Conversely, an irrevocable trust cannot be altered or revoked by the grantor, which may complicate its division during a divorce. Nevertheless, if the trust was established before the marriage or funded using separate property, it may be considered separate property.
Testamentary Trusts – A testamentary trust is created within a will and takes effect after the person’s death. Since the trust only comes into existence following the termination of the marriage, it is not subject to division in a divorce.
Conclusion
The division of trusts during a divorce is a formidable and intricate undertaking. If you find yourself navigating a divorce and have concerns about trust division, it is crucial to seek the advice of a seasoned family law attorney. With their expertise, you can safeguard your rights and interests during this trying time.