Divorce is a complex process, and few aspects are as intricate as the division of marital assets and liabilities. While many assets, such as homes, bank accounts, and retirement funds, are straightforward to categorize, the presence of a trust can introduce significant complications. Understanding how Florida law addresses trusts, particularly irrevocable trusts, in a dissolution of marriage is crucial for anyone navigating this challenging legal landscape.
In Florida, when a marriage dissolves, the court seeks to achieve an equitable distribution of marital assets and liabilities between the parties. This distribution must be equal unless there is a justification for an unequal distribution based on all relevant factors. Marital assets and liabilities generally include those acquired and incurred during the marriage, individually by either spouse or jointly. This also extends to the enhancement in value and appreciation of nonmarital assets resulting from the efforts of either party during the marriage or from contributions of marital funds or other marital assets.
Several factors guide the court’s determination of an equitable distribution:
It’s important to distinguish between marital and nonmarital assets and liabilities. Nonmarital assets generally include those acquired or incurred by either party before the marriage, or separately acquired by noninterspousal gift, bequest, devise, or descent during the marriage. Income derived from nonmarital assets is also nonmarital, unless it was treated, used, or relied upon by the parties as a marital asset. Assets and liabilities specifically excluded by a valid written agreement are also nonmarital. The cut-off date for determining marital assets and liabilities is the earliest of the date the parties enter a valid separation agreement or the date the dissolution petition is filed.
The Florida District Court of Appeal, Second District, addressed the treatment of an irrevocable trust in marital dissolution in the case of Nelson v. Nelson, 206 So. 3d 818 (2016). In this case, the former husband and former wife had, during their marriage, transferred their residential home in Palm Desert, California, into the Leah Ann Nelson Marital Trust (the Trust). The former wife was named as the sole trustee.
The central issue was whether this trust, characterized as an out-of-state home, was marital property subject to equitable distribution. The District Court of Appeal held that the trust was irrevocable, and as a result, the home was not marital property subject to equitable distribution. This decision was affirmed in part, reversed in part, and remanded with instructions.
The court’s reasoning hinged on the interpretation of Florida Statute 736.0602(1) (2015), which generally states that a trust is revocable unless the trust instrument expressly provides that it is irrevocable. In Nelson, the trust instrument ambiguously stated that the husband waived “all right to alter, amend, modify, revoke, or terminate the trust”. The court found that this language, combined with the lack of any provision dissolving the trust upon divorce, meant the trust was indeed irrevocable.
The Nelson court distinguished previous cases, noting that a trust instrument silent on dissolution upon divorce does not imply revocability. The former husband had argued that the Trust was created as an estate planning mechanism. The court highlighted that if a trust is genuinely irrevocable, and no power is reserved within it to permit revocation or modification in the event of divorce, then the assets transferred into it might not be subject to equitable distribution. Essentially, if the parties effectively relinquished their interest in the property by placing it into a truly irrevocable trust, then it may no longer be considered part of the marital estate for division purposes.
Because the trial court’s original judgment had incorrectly characterized the California home as a marital asset subject to equitable distribution, the appellate court reversed and remanded the case. This means the trial court was instructed to re-examine the equitable distribution after acknowledging that the irrevocable trust meant the asset was no longer available for division as marital property.
The Nelson case underscores the critical importance of a trust instrument’s language regarding its revocability and the specific conditions under which assets within it can be accessed or distributed. For marital dissolution purposes, if a trust is genuinely irrevocable and lacks provisions for dissolution upon divorce, the assets it holds may be shielded from equitable distribution. This highlights that assets placed into a robust, truly irrevocable trust may be considered nonmarital property, even if they were once marital assets, if the spouses validly waived their rights to control or reclaim those assets.
Given the complexities of equitable distribution and trust law, especially when state laws and interpretations of trust instruments come into play, it is imperative to consult with an experienced family law attorney. They can provide specific guidance tailored to your situation and help you understand the potential implications of trusts in your divorce proceedings.
Anthony Meehan Genova is a highly qualified legal professional specializing in family law, particularly known for his extensive experience in mediation and his commitment to community service. Mr. Genova is Board Certified in Marital & Family Law, a certification widely regarded as the “gold standard” for Florida lawyers. This certification signifies Florida’s official, independent determination of a lawyer’s expertise in a specialty field of law, a program officiated by The Florida Supreme Court and administered by The Florida Bar since 1982.
To achieve this esteemed certification, Mr. Genova demonstrated a dedication to achieving a heightened level of excellence through character, professionalism, ethics, and credibility. The rigorous process requires lawyers to have practiced law for at least five years, show substantial involvement in their chosen area of law, successfully pass a comprehensive examination evaluating a high level of knowledge, skills, and expertise, and undergo a rigorous peer-review process assessing competence, professionalism, and ethics. Additionally, board-certified lawyers must satisfy continuing legal education requirements that are more robust than those for general licensure. This certification is valid for five years, requiring continued practice and attendance of Florida Bar-approved continuing legal education courses for recertification. As of 2023, fewer than 5,000 lawyers in Florida, representing only 5% of eligible Florida Bar members, have earned board certification. Clients retaining a board-certified lawyer like Mr. Genova gain access to specialized expertise, professionalism & ethics, credibility, and a heightened dedication to excellence, with his rigorously evaluated experience offering assurance of a heightened level of proficiency in Marital & Family Law.
In addition to his board certification, Mr. Genova has been a Supreme Court Certified Marital & Family Law Mediator since 2019. He has been a dedicated member of the Executive Council of the Family Law Section of the Florida Bar since 2016, demonstrating deep engagement with the evolution and practice of family law through various leadership and committee roles: