Understanding Trusts and Divorce in California

When you're dealing with divorce in California, trust issues can become a pivotal factor in asset distribution. Assets in and income from trusts, which are often set up for tax benefits or to maintain family wealth, often prove to be quite difficult to characterize and divide during the divorce process. At Holstrom, Block & Parke, APLC, we strive to provide clarity in these challenging situations while we work to secure your rightful share of assets.

Trusts as Marital and Separate Property 

Just like businesses, trusts can be treated as either marital community property or separate property in California. If a trust was set up before the marriage, it might be considered separate property, unless trust assets were commingled with marital assets. 

On the other hand, if a trust was set up during the marriage, it is likely to be considered marital property, subject to equal division. At Holstrom, Block & Parke, we work to analyze your unique trust situation and strategize to offer you the best way forward.

The Complexities of Divorce and Trusts in California

Living in a community property state such as California, navigating the labyrinthine nature of trusts within the context of divorce is no small feat. Trusts are legal arrangements created to hold and distribute assets. Assets held in a trust can become points of contention and confusion when a marriage dissolves, especially when the assets or trust income have become intertwined with the marital estate.

Trust income is often used to support the marital lifestyle. If one spouse has a separate trust from a wealthy parent, and that trust income has been consistently used to maintain the couple's standard of living, the trust income could be considered when determining spousal support in the event of a divorce. The courts may include the spouse's access to the trust income as part of their financial picture, potentially influencing spousal support calculations.

Similarly, if marital funds have been used to contribute to a trust, that trust may no longer be considered entirely separate property. Imagine a situation where a couple contributes some portion of their shared income to a trust initially established by one spouse before the marriage. In a divorce, the courts are likely to view those contributions as community property and since they have been commingled with the trust property, at least a portion of the trust could be treated community property subject to division during divorce proceedings.

Trust Evaluation in Divorce Cases

Determining the value of a trust during a divorce proceeding in California can be a complicated process. Various factors such as the nature of trust assets, control over the trust, and the terms of the trust agreement may affect its value. Our team can help you understand these factors, ensuring that the value of the trust is accurately represented in your divorce proceedings.

Preserving Your Trust Assets

When facing a divorce, it is important to safeguard your share of trust assets which may constitute a substantial portion of your overall wealth. Our team is prepared with the right strategies to protect your interests both during your marriage or at the time of a divorce. 

Maintenance of meticulous financial records can help tremendously in the process. By keeping clear and detailed records of every transaction related to the trust—including income distributions and reinvestments—you can demonstrate the separate or commingled nature of these assets, supporting your claim to these assets during the divorce process.

It is much more difficult to convince the court that trust assets should be treated as separate property if those assets have been commingled with marital assets. For instance, depositing trust income into a shared marital account can potentially change the separate nature of these assets. By keeping trust assets strictly separate, a trust beneficiary can help ensure their preservation in the event of a divorce.

Lastly, when a couple executes a pre-or postnuptial agreement that specifically addresses the unique nature of trust assets, that agreement will override community property laws, so this type of agreement can be a valuable tool to protect trust assets. Provisions could stipulate, for example, that trust assets and income are to be considered separate property and thus not subject to division during divorce.

Contact Holstrom, Block & Parke in Southern California

Divorcing in California when you have a trust involved is a complex legal procedure. To protect your interests, you need a divorce attorney experienced in handling trusts in divorce. Call us at Holstrom, Block & Parke today at 855-939-9111 or contact us online to schedule a consultation. We stand prepared to advocate fiercely to get the allocation of trust assets you deserve. 

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The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.