If there’s one thing family courts hate, it’s a spouse who plays dirty by trying to hide assets in the hopes of avoiding having to split them as part of the marital estate.
Doing so can bring stiff consequences, such as having to cede a bigger share of marital property, or getting hit with a judgment of contempt, or even criminal fraud charges (for securing property under false pretenses) or perjury charges (you signed your divorce papers under penalty of perjury).
A common way people try to shield assets from division is by placing them in trust (a financial instrument in which a “trustee” manages assets and distributes the income generated to the “beneficiary”). If you’re doing this to cheat your soon-to-be ex, you risk the consequences noted above.
Of course, there are legitimate estate-planning reasons for putting property in trust.
Talk to a lawyer to do things right in the technical, legal and moral sense, or you risk creating red flags that judges will pick up on.
For example, if you transfer what should be considered marital property to a third party (such as a relative or friend) by creating a trust on their behalf, make sure you receive adequate “consideration” in return. In other words, the person had better be paying you something of value for the property. If they’re not, this will create justifiable suspicion, and a court might void the transfer.
There are other circumstances that may signal to a judge an intent to defraud, and each state has its own nuances of law. And there may be better estate-planning vehicles available under the circumstances.
If you’re in the process of divorcing, but you also have legitimate reasons to put property in trust, talk to an attorney as soon as possible to weigh the different options.
