Dissolving a Trust After Divorce: What You Need to Know

When you go through a divorce, one of the most important aspects of finalizing the separation is addressing the shared assets, including trusts. Trusts can serve as useful estate planning tools, but when they involve both you and your ex-spouse, it’s important to properly dissolve or restructure them to ensure that both parties are treated fairly and according to their wishes moving forward.

Whether you’ve established a revocable living trust during your marriage or have joint trust agreements, there are several key considerations and steps involved in dissolving a trust after a divorce. This process can help you avoid potential legal conflicts and provide clarity about the management and distribution of the assets held within the trust.

Why Dissolve a Trust After Divorce?

One of the primary reasons for dissolving or modifying a trust after divorce is to ensure that your estate plan aligns with your new circumstances. If you and your ex-spouse are named as co-trustees or beneficiaries in the trust, it’s essential to revisit the trust terms and make necessary adjustments. Leaving your ex-spouse as a co-trustee or beneficiary could lead to confusion, disputes, and legal complications in the future.

Additionally, a trust could contain assets that no longer align with your current goals or priorities. You may no longer wish for your ex to inherit certain assets or manage investments on your behalf. Dissolving the trust or updating its terms can give you greater control over how your assets are distributed and handled after your passing.

Important Considerations for Dissolving a Trust After Divorce 

• Avoid Conflicts: Divorce can be emotionally charged, and disagreements about the division of assets or the terms of a trust may arise. Involve mediators or legal professionals to facilitate the process.

  
  

• Timing: If you’re still in the midst of divorce proceedings, it’s important to get legal advice before taking action before dissolving or modifying the trust. You may need to take immediate steps to protect your interests or you may need wait until property division and other agreements are officially settled to avoid complications.

  
  

• Professional Guidance: Divorce and estate planning are both complex areas of law, so it’s important to work with professionals who understand how to navigate both. An attorney can help you ensure that the dissolution of your trust is done in accordance with your divorce settlement, local laws, and your long-term goals.

  
  

Steps to Dissolve a Trust After Divorce

Review the Trust Agreement 

If it’s a revocable living trust, it can generally be altered or revoked entirely by the grantors (the individuals who created the trust), which in most cases will include both you and your ex-spouse. If the trust is irrevocable, the process becomes more complicated, and you may need to seek focused legal advice before making any changes.

Consult with an Estate Planning Attorney 

Dissolving or modifying certain trusts during divorce can be a complex process, and it’s important to work with an experienced estate planning attorney who can guide you through the legal requirements and paperwork.

Determine Whether to Dissolve or Amend the Trust 

In some cases, you may not need to fully dissolve the trust but rather amend it to remove your ex-spouse as a trustee or beneficiary. If the trust was created jointly, you may choose to revoke the trust and create a new individual trust.If you decide to dissolve the trust entirely, your attorney can assist in transferring the assets to individual ownership or another trust, depending on your goals.

Transfer Assets to New Accounts 

After dissolving the trust, it’s important to ensure that any assets held within the trust are properly transferred to their new ownership structures. This could involve liquidating trust assets, re-titling real estate, or transferring ownership of financial accounts to a new trust. 

If you’ve created a new trust, you’ll need to fund it with assets from the original trust to maintain your estate plan.

Update Other Estate Planning Documents 

When dissolving a trust, it’s also essential to update other estate planning documents, such as your will, powers of attorney, and healthcare directives. You may need to designate new beneficiaries, trustees, or agents in these documents to reflect your current wishes and prevent any confusion after your death.

Final Thoughts

Dissolving a trust after divorce is a crucial step in protecting your assets and ensuring that your estate plan reflects your new circumstances. Whether you decide to dissolve the trust entirely or amend its terms, taking the necessary steps will help you maintain control over your estate and prevent legal challenges in the future.

For assistance with dissolving a trust after your divorce, or for guidance on creating a new estate plan post-divorce, contact us at 206-703-0764 or reach out online to schedule a consultation.