One of the most critical aspects to address when navigating the complexities of divorce is property division. In California, which follows a community property system, understanding how revocable trusts impact property division is essential. California Certified Family Law Specialist Judy L. Burger sheds light on revocable trusts, how they function during a divorce, and how individuals can protect their interests.
What is a Revocable Trust?
A revocable trust, also known as a living trust, is a legal arrangement where the trustor (the person who creates the trust) maintains control over the assets within the trust during their lifetime. The trustor can modify or revoke the trust at any time, hence the term “revocable.” Assets placed in a revocable trust generally avoid probate, ensuring a smoother transfer of property upon the trustor’s death. The trust remains private and becomes irrevocable upon the grantor’s death.
Revocable Trusts and Community Property
In California, all property acquired during the marriage is typically considered community property, subject to equal division upon divorce. However, the classification of assets becomes intricate when a revocable trust is involved.
- Trust Assets as Community Property: If both spouses contributed to the trust assets or if the trust was created during the marriage, the assets within the revocable trust are usually categorized as community property. This means they would be divided equally between both parties in a divorce.
- Separate Property Contributions: If one spouse funded the trust with their separate property (assets owned before the marriage or received as a gift/inheritance), those assets may remain separate property. To ensure this classification, it’s crucial to maintain clear documentation and delineation of these assets.
Key Considerations in Divorce Proceedings
Here are some important factors to keep in mind regarding revocable trusts during a divorce in California:
- Transparency: Both spouses have the right to access and review the trust documents and the assets held within the trust. Full disclosure is critical, and failing to disclose trust assets could lead to complications in the property division.
- Valuation of Trust Assets: Determining the value of the trust’s assets can be complex. It may require hiring an appraiser or financial expert, especially if the trust holds real estate, investments, or valuable personal property. Ensuring accurate valuation is crucial for fair property division.
- Revocation and Modification: If the trustor wishes to make changes or revoke the trust during divorce proceedings, they should do so with caution. The other spouse could contest the modification or revocation, especially if they believe it affects their share of the community property.
What About Commingled Assets?
Commingling refers to the situation where separate property is mixed with community property, which can complicate the process of identifying and distinguishing between the two types of assets. When trust assets become commingled, a forensic accountant may be necessary to help trace the source of the funds and classify them correctly.
Legal Assistance with CA Property Division
Given the intricacies of revocable trusts and property division during divorce, seeking legal counsel is highly advisable. CA Certified Family Law Specialist Judy Burger can help navigate the following:
- Evaluating the nature of the trust assets and whether they are classified as community or separate property.
- Facilitating negotiations regarding asset division.
- Representing your interests in court, if necessary.
Revocable trusts can significantly impact property division in a California divorce. Understanding how these trusts function within the framework of community property laws is essential for ensuring a fair and equitable division of assets.
If you are facing a divorce and have a revocable trust, contact The Law Offices of Judy L. Burger to obtain clarity and guidance through the challenges of property division. Remember, preparing for divorce involves not just emotional considerations but also strategic planning to protect your financial future. Get the professional legal help you deserve.