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Can your ex hide income in a trust?

As you and your ex-spouse work your way through post-marital life in San Antonio, you might start to notice that he or she (or others) may look for ways to hide or protect income that would otherwise be used to meet financial obligations such as child support. One such method may be to place assets into a trust. However, when reviewing income to determine a child support obligation, the court may indeed look at trust funds as income. Your spouse could try and get around this by tying that money up in properties, yet in cases where a trust holds a large amount of property and little income, the court may also view the value of property as income, as well.

Other factors the court considers when determining income for child support include:

  •          Payments from an inheritance
  •          Disability benefits
  •          Workers compensation disbursements
  •          Lottery winnings

The parties dispersing such assets to your ex-spouse may attempt to put them into a spendthrift trust. Such a trust limits your ex-spouse’s immediate access to it, but also protects the assets contained therein from creditors. Yet the Texas Family Code states that the court can require the trustee to divert the disbursements meant for your ex to you for the payment of child support.

The only limiting factor to your ability to get funds from a trust for child support may be in the case of a discretionary trust to which your ex-spouse is not the only beneficiary. In such cases, trustees must decide when and how assets are dispersed. According to the law, money taken from a discretionary trust for the payment of child support can only be pulled from income it generates, and not the trust’s principal.  

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