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Florida Court Ruling Provides Guidance For Those Using Trust For Asset Protection

March 6, 2014

Filed under: Asset Protection,Beneficiaries,Estate Planning,Trustees,Trusts — Neel Shah @ 4:30 pm

A recent appellate court ruling in Florida gives former spouses the legal grounds to take funds from a type of trust that was thought to be unavailable to them.

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State flag of Florida (Photo credit: Wikipedia)

Discretionary trusts are set up by the wealthy to give a trustee the authority to make or not make distributions from the trust. But the ruling late last year in Florida gives ex-spouses and the children of beneficiaries more leeway to gain access to those funds in certain circumstances.

However, estate planning experts are divided over whether this ruling establishes a precedent for other states, according to an article on fa-mag.com.

In this case, Bruce Berlinger challenged a lower court ruling that allowed his ex-wife, Roberta Casselberry, to obtain funds from a discretionary trust fund after he stopped paying her $16,000 a month alimony. The trust had been paying the money directly to her and not to him.

Usually, a creditor may not garnish funds in a discretionary trust if the trustee does not make the distributions to the beneficiary. In this case, the court ruling the ex-spouse was deemed to be an “exception creditor “and could seek distributions from the trust to satisfy her alimony requirements.

About 30 states have some form of “exception creditor” provision in their trust codes.

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