Family Law

Effect of Trust Funds on Child Support

Many people receive income from trusts. A trust is a relationship in which a party called a trustee manages property for the benefit of another party called a beneficiary. There're many different types of trusts.

If you're getting a divorce and have a child, you may be entitled to child support. Likewise, you may be ordered to pay child support to the other parent. The court examines multiple factors to determine the amount of child support needed to cover the child's expenses. The most important factor is your income level. Money that you receive from most sources will be considered income for child support purposes.

You may receive funds from a trust and wonder whether they'll be considered by the court in determining child support. In most cases, the court will consider money from a trust as income for child support purposes. Talk to an attorney if you or the other parent receive funds from a trust and either of you have child support obligations.

Available Income for Child Support

Your income level and the income level of the other parent will greatly affect the amount of child support you'll receive or pay. States differ as to how to calculate child support. There're many different sources of money that the court may consider as available income for support. Some examples include:

  • Salaries
  • Business income
  • Overtime pay
  • Rents
  • Money earned from an inheritance
  • Workers' compensation
  • Social Security retirement or disability benefits
  • Lottery winnings

With a few exceptions, any money you receive will be considered by the court as income for child support purposes.

Funds from a Trust

A trust may be set up by you or by another party in a variety of ways. Sometimes the beneficiary will receive money from the trust automatically every year. Other trusts may be set up in which the trustee has full authority as to how the money will be spent and how much money the beneficiary will receive from the trust. These types of trusts are called spendthrift trusts.

The court will usually consider funds from any trust, including spendthrift trusts, as income for child support purposes. Most states will also allow the court to consider the property in the trust if the trust has a large amount of property but a small amount of income.

Since states differ as to the rules of trusts and to the calculation child support, you should speak to an attorney about the possibility of the other parent creating a trust that can't be reached for child support purposes.

Garnishment of a Trust

In some cases, a parent won't pay his child support obligations. If the other parent is failing to pay child support, you may be interested in garnishing his income. Garnishment is when a creditor seeks to have money directly sent to her to pay a debt instead of having the money sent to the debtor. You can have the other parent's income sent directly to you for child support so that you don't have to depend on him to pay the support.

If a parent is failing to pay child support, the court may order the income from his trust to be garnished. In most states, the court can order the trustee of a spendthrift trust to distribute income to pay for the beneficiary's child support obligations. The trustee will have to be notified to send a certain amount of money to the other parent. Talk to an attorney if the other parent is not paying child support and is receiving income from a trust.

Questions for Your Attorney

  • Can I set up a trust to reduce the amount of my child support payments to my ex-spouse?
  • Will the court consider the large amount of property in my ex-spouse's trust for child support purposes even though the income produced by the trust is very small?
  • If my ex-spouse is failing to pay child support, can I have the trustee of his trust withhold the money to pay for his support obligations?
  • Can I structure a trust so that the property held by trust, contrasted to the income it generates, will be protected from child support claims against the beneficiaries, who are my adult children and grandchildren?
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