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Ensuring that trusts are separate property

Pennsylvania couples might wish to take precautions to protect themselves in the event a marriage fails. It is important to understand what constitutes joint and separate property while safeguarding assets when possible.

One partner may come from a wealthy family and could stand to inherit substantial sums from relatives. A prenuptial arrangement could be needed if the assets do not count as separate property. While rules vary between states, separate property generally includes gifts, inheritances and property acquired before a marriage. However, an inheritance might not count as separate property when issued through a trust.

When a third-party trust is intended for one spouse, the trust terms should specify that the assets are not marital property. One may also include that contents of the trust should not be used when determining alimony, and the terms should avoid language that is open to interpretation or vague. A grantor must ensure that the terms do not go against public policy or state laws. A heir must also keep trust funds separate from other money and should not make purchases with both separate and joint money. The other partner could have a claim to the separate assets when it is mixed with marital property.

While gifts and inheritances can count as separate property, business assets and retirement accounts may not. The value of a business may be marital property when the venture was started after a marriage. One might wish to consult an attorney who can negotiate a settlement that includes transferring all business assets to one spouse in exchange for something else.

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