Wealth Litigated - EP 107: Divorce Busting Irrevocable Trusts?
January 7, 2026
What happens when an irrevocable family trust holds over $2 million in marital assets, but excludes one spouse entirely upon divorce? This episode deconstructs the landmark Dahl v. Dahl (Utah Supreme Court, 2015) decision, where a single word in a trust document—and a massive procedural oversight—put a $2 million marital interest at risk.
Professor Kelly Lise Murray, JD, breaks down how "irrevocable" trusts can be unexpectedly revoked and why wealth professionals must understand the "settlor by contribution" rule to protect client assets.
What happens when an irrevocable family trust holds over $2 million in marital assets, but excludes one spouse entirely upon divorce? This episode deconstructs the landmark Dahl v. Dahl (Utah Supreme Court, 2015) decision, where a single word in a trust document—and a massive procedural oversight—put a $2 million marital interest at risk.
Professor Kelly Lise Murray, JD, breaks down how "irrevocable" trusts can be unexpectedly revoked and why wealth professionals must understand the "settlor by contribution" rule to protect client assets.
What You’ll Learn
· The "Any" vs. "No" Clause: How a suspected typo transformed an irrevocable trust into a revocable one.
· Joinder Jeopardy: Why failing to name the trust as a party can tank a divorce case.
· Public Policy Overrides: When state law trumps a trust’s chosen jurisdiction (Utah vs. Nevada).
· Settlor Status: Why contributing money makes you a "creator" of a trust, even if you never signed the paperwork.
Case Background: Dahl v. Dahl
· The Setup: During an 18-year marriage, the husband created the "Dahl Family Irrevocable Trust".
· The Assets: The couple transferred their marital home and other assets worth approximately $4 million into the trust.
· The Trap: The wife was not named as a beneficiary; she was defined only as "Settlor's wife," meaning she would lose her status upon divorce.
· The "Typo": Section 5.5 stated the Settlor reserves "any power whatsoever" to alter or amend the trust, rather than "no power."
The Four Legal Hurdles
To recover her $2 million, the wife had to "run the table" on four critical issues:
1. Joinder: The trust was a separate legal entity and should have been joined as a defendant in the divorce. She only survived this error through "pure legal luck" when the Supreme Court joined the cases sua sponte.
2. Choice of Law: While the trust specified Nevada law, the Court ruled Utah’s public policy on equitable distribution took precedence.
3. Revocability: The Court held that an "unrestricted power to amend" includes the power to revoke.
4. Settlor Identity: Under Utah law, the wife was a settlor because she contributed property, allowing her to revoke the trust as to her $2 million contribution.
Key Takeaways for Wealth Professionals
For Attorneys
· Join the Trust Early: Always name an irrevocable trust as a necessary third party to ensure the court has jurisdiction over its assets.
· Draft with Precision: Avoid broad amendment powers in irrevocable trusts; consistency throughout the document is vital.
· Separate Counsel: Both spouses must have independent representation when transferring marital property into a trust.
For Wealth Managers & Fiduciaries
· The Offset Strategy: If a trust is truly irrevocable (like in the 2024 Oaks case), look for other assets to "offset" the value lost to the trust.
· Identify All Settlors: Remember that anyone who funds a trust may be legally considered a settlor with revocation rights.
Timeline
· 1992: Marriage.
· 2006: Husband files for divorce.
· July 2009: Wife’s lawyers file a separate lawsuit against the trust at the 11th hour.
· July 2010: Divorce decree signed; trust assets excluded from the division.
· August 2015: Utah Supreme Court consolidates the cases and rules in favor of the wife.
ABOUT THE HOST
Professor Kelly Lise Murray, JD is a lawyer and retired Vanderbilt Law School faculty member (18 years) specializing in wealth preservation strategies. She is a graduate of Stanford University (Phi Beta Kappa) and Harvard Law School (cum laude).
Disclaimer: This show is for informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client relationship is formed.
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