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Protected trusts can complicate high-asset divorce proceedings

When couples in Fort Collins head to the negotiating table to work out the terms of their divorce, among the first objectives is to create a financial settlement that establishes a sense of security for both parties in post-divorce life. For couples going through a high-asset divorce, this process may be rather complex, particularly if one party is trying to protect their holdings.

One way that individuals may choose to guard their assets is by establishing a trust. In many circumstances, the assets placed in a trust may not be included in property division. Determining what circumstances allow assets to be pulled from a trust often depends on the state in which the financial arrangement is established.

South Dakota recently changed their laws regarding trusts created within state borders. The changes make it very difficult for individuals to claim assets from their spouse's trust during divorce. As of July 1, any money that has been placed in a "domestic asset protection" trust will be off limits for divorcing spouses under most circumstances. The few exceptions are in cases where the spouse with the trust owes back child support or alimony.

Not only has this move sent ripples through the financial industry, it has also likely been put on the radars of many family law attorneys. Dealing with complex assets during divorce can create a number of hurdles, particularly with changing laws that could impact some Colorado residents. Untangling the nature and extent of assets each spouse holds is an important part of ensuring that a divorce is completed in an honest and fair manner.

Source: The Trust Advisor, "Trust Wars: Experts Say New Law Makes South Dakota Asset Protection Trusts A Top Choice," Scott Martin, March 12, 2013

  • Our firm has experience working through complex high-asset divorces. To learn more, please check out our Colorado family law page.

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