Do you and your spouse have your assets in trust? Do you know how those assets will be divided should you two divorce? A recent divorce case involving a multi-billion dollar estate reveals how one state’s Dakota laws regarding trusts allow for a vastly imbalanced division.
Manipulating access to marital assets through trusts
Billionaire Ed Bosarge filed for divorce in 2017 after a 30-year marriage. While his wife estimates the total value of their assets at about $2 billion, she may end up with nothing in the end. The husband allegedly transferred their marital assets from a number of complex trusts — to which she was a named beneficiary — into new trusts that shut out her interests in the assets. He claims that the assets in the new trusts are therefore not eligible for marital property division.
Is South Dakota the next mini-Switzerland?
South Dakota’s lack of estate, inheritance or capital gains taxes makes it attractive to wealthy families. Combine that with the state’s perpetual trusts and its sweeping privacy and asset protections against creditors, business partners and ex-spouses, it difficult to circumnavigate the trust provisions.
South Dakota laws did not require notification to the wife when the husband made changes to the trusts. His manipulation of the trust assets acquired during their marriage may fall outside the definition of marital property. While she was a party to many of the initial trusts they established, her rights to the income and assets were effectively cut away over time before her husband filed for divorce in 2017. She filed a lawsuit against him in 2018 alleging he purposefully used the trusts to cheat her out of her share of their community property.
While California and South Dakota laws differ greatly, make certain you understand the provisions of the trusts you and your spouse own. This knowledge may help you avoid a similar situation.