Protecting trust assets in divorce is a common concern for couples with significant trusts. A recent 2021 case, In the Matter of Merrill & Merrill, examines how New Hampshire courts handle trusts with spendthrift provisions.
The questions in this case focused on whether a trust with a spendthrift provision could be included in the marital estate during a divorce. If your divorce involves a trust with such a provision, this decision could be highly relevant to your case. The court clearly ruled that assets protected by a valid spendthrift provision should not be considered marital property. Therefore, if the trust restricts transfers or control by creditors, spouses, or even the beneficiaries themselves, the ruling may apply to your situation.
To reach this conclusion, the court reviewed the language of the trust document. If your trust contains specific terms that limit the beneficiary’s ability to transfer assets or prevents interference from outside parties like creditors or spouses, it may qualify as a spendthrift trust. In this instance, the court found that such language was sufficient to exclude the trust assets from the marital estate. As a result, if your trust includes similar provisions, you may be able to argue for a similar exclusion of those assets in your divorce proceedings.
Furthermore, the court noted that including trust assets in the marital estate was a significant error, as it inflated the estate’s value by several hundred thousand dollars, which could have drastically affected the financial division. This mistake highlights how improperly including trust assets in a divorce property division can skew the overall outcome of the case. Thus, if the trust makes up a large portion of the marital assets, this ruling is important for ensuring an accurate and fair valuation during the divorce.
Ultimately, if your case involves a trust with a spendthrift provision, this decision could be critical in arguing that the trust’s assets should be excluded from the marital estate. In conclusion, this case underscores the importance of carefully reviewing the trust’s language to determine whether it can protect assets from being divided during a divorce.
If you’re going through a divorce or have any questions, please contact us to schedule a consultation.
