Trusts and Divorce: When Are Trust Assets Subject to Equitable Distribution in New York?

Will a trust be divided in a New York divorce? The answer turns on who created and funded the trust, where the money came from, and what happened to distributions during the marriage. A trust's label matters far less than its source of funding.

Are trust assets marital or separate property in New York?

Marital property is all property acquired by either or both spouses during the marriage and before a separation agreement is signed or a divorce action is started, "regardless of the form in which title is held" (Domestic Relations Law (DRL) § 236(B)(1)(c)). Separate property includes property acquired before the marriage; property acquired by inheritance or as a gift from someone other than the spouse; property acquired in exchange for separate property, and its increase in value, "except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse"; and property described as separate in a valid written agreement (DRL § 236(B)(1)(d)).

The starting point favors the marital side. Property acquired during the marriage is presumed marital unless it is clearly separate, and the spouse who claims it is separate has the burden of rebutting that presumption (Fields v. Fields, 15 N.Y.3d 158 (2010)). In practice, that means documents: the trust agreement, account statements and a clear record of where each distribution went. Our guide to equitable distribution in New York explains how marital property is then divided.

How common trust situations usually start out

• A trust a parent or relative created and funded for you. Your interest is generally separate, received by gift or inheritance. Growth inside the trust generally stays separate, except to the extent it is due in part to your spouse's contributions or efforts.
• Distributions from that trust. They start out separate but can lose that character if mixed with marital funds or used to buy jointly owned property.
• A revocable living trust funded during the marriage with earnings or savings. The assets are marital to the extent they were marital when they went in.
• A trust you created and funded before the marriage. Generally separate, but marital money added during the marriage is marital.
• A remainder interest or expected inheritance from a third party. Generally separate, but it still must be disclosed.

How trust money can lose its separate character

Deposits into joint accounts

Funds in a joint account are presumed to be marital property. The spouse who says the money is separate must rebut that presumption, for example by tracing the deposits to a separate source and showing they were placed in the joint account for convenience (Ramadan v. Ramadan, 195 A.D.3d 1174 (3d Dep't 2021)). In that case, money traced to a spouse's premarital account was treated as his separate property, but the amount by which that account had grown during the marriage was marital. The longer trust money sits in a shared account, the harder it is to trace.

Using trust money to buy a home or other joint property

A home bought during the marriage is generally marital property, even when one spouse's separate money made the down payment. The Court of Appeals has explained that a separate-property down payment "does not, in and of itself, establish the property's character as separate property," and that courts "have usually given the spouse who made the separate property contribution a credit for such payment before determining how to equitably distribute the remaining value of the asset" (Fields v. Fields, 15 N.Y.3d 158 (2010)). Growth in the home's value is a separate question, and a credit does not automatically include it.

For example, suppose a spouse uses a $100,000 trust distribution toward a home titled in both names, and the home has $700,000 of equity at the time of the divorce. The home is marital. If the court credits the $100,000 traced contribution, $600,000 remains to be divided. An equal division of that remainder would give each spouse $300,000, so the contributing spouse would receive $400,000 in total. A court may divide the remainder differently after weighing the statutory factors.

Spending trust distributions on family expenses

Using trust distributions for household bills, vacations or tuition does not, by itself, turn your interest in a trust someone else created into marital property. But money that has been spent is usually gone. The Court of Appeals has said that courts generally should not try to adjust for "payments out of separate property" that "benefitted both parties," and that "[t]he parties' choice of how to spend funds during the course of the marriage should ordinarily be respected" (Mahoney-Buntzman v. Buntzman, 12 N.Y.3d 415 (2009)). If you expect to be repaid for a contribution, address it in a properly executed postnuptial agreement.

Spendthrift clauses and self-settled trusts

A spendthrift clause restricts a beneficiary's ability to transfer a trust interest and keeps the beneficiary's creditors from reaching it before it is paid out. New York law also restricts transfers of a beneficiary's right to receive trust income unless the trust instrument allows them (EPTL 7-1.5(a)(1)).

Those rules limit transfers and creditors. They do not decide whether a trust interest is marital or separate; that question is governed by DRL § 236 and turns on how the interest was acquired and funded. A trust funded with marital money holds marital property whatever its terms. And a trust you create for your own benefit gives you no protection from your own creditors in New York: "A disposition in trust for the use of the creator is void as against the existing or subsequent creditors of the creator" (EPTL 7-3.1(a)). Whether a support order can be enforced against trust distributions is a separate, technical question, so get advice about your specific trust.

Moving assets into a trust before or during a divorce

Transferring marital assets into a trust does not make them separate property. If a spouse moves marital money to a trust for someone else, the court may consider "the wasteful dissipation of assets by either spouse" and "any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration" when it divides the remaining property (DRL § 236(B)(5)(d)(12)–(13)).

Once a divorce is filed, New York's automatic orders bar either spouse from selling, transferring, concealing or otherwise disposing of property without written consent or a court order, except in the usual course of business, for customary household expenses or for reasonable attorney's fees (DRL § 236(B)(2)(b)). See our article on automatic orders.

Trust income, child support and maintenance

A trust can be separate property and still affect support. For child support, income starts with gross income "as should have been or should be reported" on the most recent federal tax return, and includes investment income not already counted (DRL § 240(1-b)(b)(5)(i)–(ii)). The court may also impute income from other resources available to a parent, including "money, goods, or services provided by relatives and friends" (DRL § 240(1-b)(b)(5)(iv)). Maintenance uses the same income definition (DRL § 236(B)(6)(b)(4)).

So taxable trust income reported on a spouse's return generally counts, and regular distributions from a family trust may be considered even when the trust principal is not divided. For families with income above the statutory caps, see our guide to child support above the $193,000 cap.

Disclosing trust interests in a divorce

Each spouse's sworn statement of net worth must include "all income and assets of whatsoever kind and nature and wherever situated" (DRL § 236(B)(4)(a)). New York's official form has an item for contingent interests, listing examples such as "interests subject to life estates" and "prospective inheritances," and its "Other Assets" item mentions assets held in trust. Expect to produce the trust agreement and account statements. Disclosing an interest is not a concession that it is marital.

Protecting trust assets during the marriage

• Keep trust money in your own name. Use an account titled only to you, and do not add marital earnings to it.
• Avoid joint titling. Joint accounts and jointly owned property invite the presumption that the money is marital.
• Keep records of the trust agreement, each distribution and where it went.
• Use a written agreement. A prenuptial or postnuptial agreement can designate trust interests, distributions and their growth as separate property (DRL § 236(B)(1)(d)(4)). To be enforceable, it must be in writing, signed by both spouses and acknowledged in the manner required to record a deed (DRL § 236(B)(3)). See our guides to prenuptial agreements and postnuptial agreements.

Raise trust issues before the divorce judgment is entered. In New York, "An equitable distribution award cannot be modified . . . based upon a change of circumstances" (Manuella v. Manuella, 242 A.D.3d 870 (2d Dep't 2025)). Maintenance is different: it can be modified on a proper showing, such as a substantial change in circumstances (DRL § 236(B)(9)(b)(1)).

Frequently Asked Questions

Is a trust from my parents marital property in a New York divorce?

Generally no. An interest in a trust that a parent or other third party created and funded is usually separate property, because it was received by gift or inheritance. But New York presumes that property acquired during the marriage is marital, so you must be able to prove the source. Trust money that is mixed with marital funds or used to buy jointly owned property can lose some or all of its separate character.

Does depositing trust distributions into a joint account make them marital?

It can. Funds in a joint account are presumed to be marital property. The spouse who says the money is separate must rebut that presumption, for example by tracing the deposits to the trust and showing they were placed in the joint account for convenience. Money already spent on household expenses is generally not reimbursed, because New York courts ordinarily respect how spouses chose to spend funds during the marriage.

Does a spendthrift clause protect a trust in a New York divorce?

Not on the question of division. A spendthrift clause limits a beneficiary's ability to transfer a trust interest and shields it from the beneficiary's creditors, but whether the interest is marital or separate depends on how it was acquired and funded. A trust funded with marital property holds marital property whatever its terms, and a trust you create for your own benefit gives no protection from your creditors in New York.

Can trust income increase child support or maintenance?

Yes. Even when a trust interest is separate property, income from it can count in support calculations. Child support starts with gross income as reported, or as it should have been reported, on the federal tax return, and the court may impute income from other resources, including money provided by relatives. New York's maintenance guidelines use the same definition of income.

Can property division be changed later if my trust situation changes?

Generally no. In New York, an equitable distribution award cannot be modified because circumstances change after the judgment, unlike maintenance, which can be modified on a proper showing. That is why trust interests, distributions and any separate contributions to marital property should be identified, documented and addressed before the divorce judgment is entered.

If a trust, inheritance or family gift is part of your marriage, Neuhaus & Yacoob can help you document it, address it in a postnuptial agreement, or protect your position in a contested or high-net-worth divorce. Joel Yacoob, who is admitted in New York and New Jersey, handles every matter personally. To get started, complete our online intake form or call (718) 975-1123.

---

This article is for general information only and is not legal advice. Reading it does not create an attorney-client relationship. The law changes and every situation is different; consult a lawyer about your own circumstances.