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A divorce trust is a way to protect assets from the ex

When a couple gets married in Florida, they don’t want to think about the possibility of the marriage ending and any marital assets being disputed. For that reason, many couples don’t write up a prenuptial agreement, as they might find the idea of drawing up a prenup too unpleasant or contentious.

There are other ways to work out asset protection without needing a prenuptial agreement. Divorce trusts are a little-known but effective way that either spouse can protect his or her own assets from becoming disputed marital property.

Many financial and advisors are advising couples to draw up their own trusts to use in a divorce, often called self-settled trusts. These trust options can help one spouse protect his or her property against an unintended beneficiary, distribute complicated assets, and protect assets against the other spouse in a divorce.

A self-settled trust lets the trust owner use assets for his or her own benefit. 13 states currently allow this type of trust. Experts caution that any trust should be used as a safety net, but not the only source of income. This can prevent your ex-spouse from claiming the trust as part of the marital estate in the divorce proceeding.

Planning for a divorce is an unpleasant thought, especially if you believe there’s no reason to fear a divorce. But like many life events, you can’t always predict your marriage will last forever. Because most self-settled trusts should be set up before you have any creditors, including an ex-spouse, it’s a good idea to get started protecting your assets with a divorce trust right away.

Source: Barron’s, “Divorce Trusts,” Tatiana Serafin, May 18, 2013

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