Marriage settlements are back. Complex trusts intended to protect family fortunes were once the centerpiece of wedding planning and family negotiations. In more modern times, these trust-based settlements ceded their popularity to premarital contracting and the prenuptial agreement. But in recent years, new trust forms with unprecedented asset protection features have prompted a resurgence of trust usage in marriage planning. Playing on notions of family money and legacy building, these new trusts function much like their predecessors, except in one noteworthy respect. Conventional trusts have always provided asset protection based on the notion of third-party freedom of disposition. The new marriage trusts give asset protection to trusts created by a first-party to the marriage. Accordingly, one spouse can create an asset protection trust—for his or her exclusive benefit using what is potentially marital property— without the knowledge of the other spouse. That individual spouses are seeking new ways to protect wealth is not necessarily surprising. Nevertheless, the new powers being given to individual spouses to shelter assets within marriage are alarming. In practice, the new trusts are disconcerting because they allow for a significant amount of unilateral decision-making. In theory, the new trusts are troubling because they disrupt the precarious equilibrium that exists between two competing “value-spheres”: family wealth preservation and marital partnership. This Article proposes a distinctive framework, based on the notion of competing value-spheres, for assessing the growing phenomenon of asset protection trusts in marriage and concludes that these trusts represent an aggressive incursion of wealth preservation into the realm of modern marital partnership. That is to say, the new asset protection trusts undermine the values of personal trust and financial transparency within marriage.
U.C. Irvine L. Rev.
Available at: https://scholarship.law.uci.edu/ucilr/vol10/iss1/7