What Happens to a Living Trust in a Divorce in California?

Living trusts are powerful financial planning tools in California, but they can become complex during a divorce. You might wonder how your carefully crafted trust will fare when your marriage ends.

In a California divorce, assets held in a living trust are subject to the state’s community property laws and may be divided equally between spouses if acquired during the marriage. This means the trust does not shield marital assets from division, contrary to what some might believe.

The fate of your living trust in divorce depends on several factors, including when it was created and the source of the assets. Trusts established before marriage or containing separate property may be treated differently than those created with marital funds. Understanding these nuances can help you navigate the divorce process more effectively and protect your interests.

What Happens To A Living Trust In A Divorce

Living trusts are subject to division during divorce proceedings in California. The trust assets may be split between spouses based on community property laws. Changes to the trust structure and beneficiaries are often necessary.

Understanding Living Trusts in California

A living trust in California allows you to manage your assets during your lifetime and specify how they should be distributed after your death. You can modify or revoke this trust while you’re alive. It offers benefits like avoiding probate and maintaining privacy.

In a divorce, your living trust doesn’t shield assets from division. California law requires full disclosure of all assets, including those held in trusts. The court considers trust assets when determining the overall property division between spouses.

Community vs Separate Property

California is a community property state. This means assets acquired during marriage are generally considered jointly owned by both spouses. Separate property includes assets owned before marriage or received as inheritance.

In a living trust, both community and separate property can be included. During divorce, community property is typically split 50/50. Separate property usually remains with the original owner.

You’ll need to identify which trust assets are community vs separate property. This classification impacts how they’re divided in the divorce settlement.

Division of Trust Assets during Divorce

When divorcing, you and your spouse (or a judge) must determine how to divide trust assets. The trust is often dissolved as part of this process. Assets are then distributed according to the divorce agreement.

You may need to:

• Identify all trust assets
• Determine their classification (community or separate)
• Agree on how to split community property
• Decide whether to maintain the trust with modified terms
• Create new individual trusts if desired

Changes to the trust must comply with California law to be legally binding. Consider working with a professional experienced in high-asset divorces to navigate this complex process.

Legal Process and Considerations

Navigating the legal aspects of a living trust during divorce in California requires understanding key procedures and court involvement. The process often involves modifying trust documents and determining asset division.

Modifying or Terminating a Living Trust

During a divorce, you may need to modify or terminate your living trust. To do this, review the trust’s terms and conditions carefully. If both spouses agree, you can amend or revoke the trust jointly.

For revocable trusts, you can typically make changes without court approval. Irrevocable trusts are more complex and usually require beneficiary consent or court intervention to modify.

Consider removing your spouse as a beneficiary or trustee. Update asset schedules to reflect new ownership after property division. Consult with a living trust expert like the team at Laguna Legal.  

Remember, many estate plans include a Durable Power of Attorney and/or Healthcare Directive, which would continue to give your soon to be ex-spouse power over your assets or your healthcare,  if not revoked.

Role of the Court in Trust Matters

California courts play a significant role in trust-related issues during divorce. They ensure fair asset division and may scrutinize trust documents for potential hidden assets.

Courts can order the division of trust assets if they’re considered marital property. They may also freeze trust accounts to prevent dissipation of assets during proceedings.

If spouses disagree on trust modifications, the court can intervene to resolve disputes. You may need to provide detailed trust information to the court, including asset inventories and financial records.

In complex cases, the court might appoint a special master or forensic accountant to analyze trust assets and recommend equitable distribution.

Contact Laguna Legal for Help With Your Living Trust

Navigating living trusts during divorce can be complex. Laguna Legal offers expert assistance with trust matters in California.  Since the team at Laguna Legal is also familiar with divorce and divorce mediation, we are able to assist beyond someone who is familiar with estate planning but not familiar with California divorce law.

Our experienced team can guide you through modifying or dissolving a trust as part of your divorce proceedings. We understand the nuances of California trust law and how it intersects with divorce regulations.

Laguna Legal provides comprehensive estate planning services, including:

• Creating new living trusts
• Modifying existing trusts
• Trust Administration
• Probate avoidance strategies
• Divorce mediation, if required

Our team can review your current trust and recommend changes to protect your interests post-divorce. We’ll ensure your trust aligns with your new circumstances and goals.

To get started, you can schedule a consultation with Laguna Legal. Our offices are located in Mission Viejo, California. During your meeting, we’ll assess your situation and outline potential options for your trust.

Laguna Legal offers competitive pricing for our services:

• $950 for a single person’s complete estate plan
• $1,500 for a married couple’s estate plan
• $600 per property transferred into your trust

These prices include witnessing, notarization, and electronic recording fees where applicable.

Don’t let trust complications add stress to your divorce. Contact Laguna Legal today for professional guidance on managing your living trust through this transition.