What Happens to a Family Trust During a Divorce?

Divorce involves many changes, and if you are going through this process in Canada, you are probably wondering what could happen to your family’s trust. The simple answer is that separating from your partner does not directly impact the trust.

However, the court may consider your or your spouse’s beneficial interest when fairly dividing the marital assets, depending on the specifics of the trust and the circumstances of the marriage. In this blog, learn more about what happens to a family trust during a divorce and how one of the lawyers from The Riley Divorce & Family Law Firm could help.

Understanding the Impact on Your Family Trust

Family trusts are a common method for wealthy couples to transfer their assets to future generations. During a divorce, a family trust does not automatically end. The outcome of the trust largely depends on its specific terms and how it was created.

Exploring Beneficial Interest

Beneficial interest refers to the potential to receive distributions from a family trust. The court would need to assess the extent of a spouse’s beneficial interest in the trust by examining the deed, distribution history, the level of control that the spouse has over the trust, and when the trust was established—whether it was before or after the marriage. This assessment may also change the beneficiary designation if a spouse is a beneficiary of the family trust during the divorce process.

When the Courts May Intervene

Creating a family trust to deliberately avoid dividing marital assets during a divorce could result in complex legal issues. The court could consider the trust assets as part of the community property and divide them equally between the spouses, especially if marital assets were used to fund the trust.

Speak With a Lawyer About Your Family Trust During a Separation

Many family trusts require careful legal analysis to determine a fair outcome for all parties. Our experienced lawyers at The Riley Divorce & Family Law Firm could help you navigate this complicated legal process. We are available 24 hours a day to help you through this difficult time. To find out about what happens to a family trust during a divorce, call us today.