Going through a divorce is one of the most emotionally demanding experiences a person can face. When a family trust is part of the picture, the process becomes even more complex. Many people are unsure whether their trust is protected, how it will be treated during property division, or what steps they need to take once a divorce is finalized. If you have a trust and are facing the end of a marriage in Fort Mill, SC, understanding how divorce affects that trust can help you make informed decisions and protect what matters most to you.
If you're facing divorce and have a trust, don't wait — contact us now by filling out our online contact form or calling (704) 289-3250 to speak with a member of our team today.
What Is a Family Trust, and Why Does It Matter in a Divorce?
A trust is a legal arrangement in which one person (called the grantor or settlor) transfers assets — such as property, investments, or money — to be managed by another person or institution (called the trustee) for the benefit of specific individuals (called beneficiaries). Families often use trusts for estate planning, asset protection, or providing for children and other loved ones over time.
When a couple divorces, the court must determine which assets belong to the marital estate — meaning assets that are subject to division between spouses — and which assets are considered separate property. Where a trust falls in that determination depends on several important factors, including who created it, when it was created, and how it has been managed during the marriage.
Is a Trust Considered Marital Property in South Carolina?
South Carolina follows the principle of equitable distribution when dividing marital assets in a divorce. Equitable distribution does not mean a 50/50 split — it means the court divides assets in a way it deems fair based on the circumstances. The key question for trusts is whether the trust assets are considered marital property.
Generally speaking, a trust is more likely to be treated as separate property — and therefore not subject to division — if it was created by one spouse before the marriage or funded entirely with that spouse's separate assets. However, the situation can quickly become complicated. If marital funds were ever contributed to the trust, or if both spouses benefited from the trust during the marriage, a court may determine that some or all of the trust assets have a marital component.
Revocable vs. Irrevocable Trusts: A Critical Distinction
Understanding the type of trust involved is essential in a divorce. The two most common types are revocable trusts and irrevocable trusts, and they are treated very differently under the law.
A revocable trust — sometimes called a living trust — is one that the grantor can change or dissolve at any time. Because the grantor retains control over the assets, courts typically consider those assets accessible and may include them as part of the marital estate during a divorce.
An irrevocable trust, on the other hand, is one that generally cannot be changed or taken back once it is established. Because the grantor gives up control of the assets, those assets may be better shielded from division in a divorce — but this is not guaranteed. Courts will look closely at the specific terms of the trust and how it was funded.
When Can a Spouse Make a Claim Against a Trust?
Even if a trust appears to be separate property, a spouse may still attempt to make a claim against it under certain circumstances. Courts take a fact-specific approach, meaning the details of each situation matter greatly.
Some of the most common situations that can give rise to a spousal claim against a trust include:
- The spouse is named as a beneficiary of the trust and receives regular distributions from it
- Marital funds — such as income earned during the marriage — were deposited into or used to fund the trust
- The couple used trust property for shared marital purposes, such as living in a home held by the trust
- One spouse served as trustee and had discretion over how assets were used during the marriage
- A joint trust was created by both spouses during the marriage
These factors do not automatically mean a trust will be divided, but they can open the door to legal arguments that some portion of the trust has become marital in nature. Working with a knowledgeable Fort Mill family law attorney is essential to understanding your specific exposure and protecting your interests.
Joint Trusts and Divorce: A Common Source of Confusion
Many married couples create what is called a joint revocable trust, where both spouses are grantors, trustees, and beneficiaries. This type of trust is popular for estate planning because it simplifies asset management and avoids probate — the court process that oversees the distribution of a deceased person's estate.
When a couple with a joint trust divorces, unraveling that trust can be particularly challenging. Because both spouses contributed to and benefit from the trust, courts will typically treat the trust assets as marital property subject to division. The trust will often need to be formally dissolved or separated as part of the divorce settlement, and assets will need to be retitled in each spouse's individual name.
If children are beneficiaries of the joint trust, the situation becomes even more nuanced. Courts will carefully consider the children's interests, and the divorcing spouses will need to decide whether a new, separate trust should be established to continue providing for the children after the divorce.
What Happens to Trust Assets You Inherited?
Inherited trusts — those created by a parent, grandparent, or other relative for your benefit — are generally treated as separate property in a South Carolina divorce, provided certain conditions are met.
Key factors that help keep inherited trust assets separate include:
- The trust was created by a third party, not by either spouse
- You never mixed trust distributions with marital funds (a concept known as commingling)
- The trust documents clearly establish you as the sole beneficiary
- Distributions from the trust were kept in a separate account and not used for shared marital expenses
If trust distributions were deposited into a joint bank account or used to pay shared household bills, tracing and separating those funds can become legally complex. Keeping thorough financial records throughout a marriage is one of the simplest ways to protect inherited assets in the event of a divorce.
Once the inherited assets have been commingled with marital funds, untangling them requires careful documentation and, often, the assistance of a financial professional working alongside your legal team.
Updating Your Trust After Divorce
Even after a divorce is finalized, your trust may not automatically reflect your new circumstances. Depending on the type of trust and the terms set out in the trust document, you may need to take deliberate legal steps to bring your estate plan in line with your post-divorce life.
Some of the most important updates to consider after a divorce include removing your former spouse as a trustee or successor trustee, updating beneficiary designations, and revising any provisions that were written with the assumption of a shared life. In South Carolina, state law may automatically revoke certain provisions related to a former spouse, but this does not cover every situation — and it does not apply to all types of trusts or all types of assets.
A divorce is ultimately a fresh start, and your trust should reflect the life you are building going forward. Reviewing and updating your estate plan as soon as possible after your divorce is finalized is a meaningful step toward securing your future.
Talk to a Fort Mill Family Law Attorney About Your Divorce and Trust
Navigating a divorce when a trust is involved requires a thorough understanding of both family law and estate planning principles. The team at Collins Family & Elder Law Group is here to help you understand your rights, evaluate the specific nature of your trust, and work toward an outcome that protects you and your family. We work with clients in Fort Mill, SC, and throughout the surrounding area, and we are committed to making a complicated process as clear and manageable as possible.
If you have questions about how a divorce may affect your trust or your estate plan, we encourage you to reach out. You can connect with our team by completing our online contact form or by calling us at (704) 289-3250. We are ready to listen and help you move forward with confidence.
