Trusts vary in their structure, funding, and terms, so it’s hard to know how divorce will impact your trust without review. It’s safe to say, without question, your trust (and really your entire estate plan) should be reviewed during your divorce to prevent unforeseen negative outcomes.
The impact of a divorce on your trust can depend on:
The Trust’s Structure
Trusts frequently name the spouse as a trustee and beneficiary. In divorce, clarify your wishes in regards to these provisions. Even if you want to keep each other in your financial plans going forward, the trust should be amended appropriately after your divorce is complete, so your intention is clear.
Whether It’s Revocable or Irrevocable
If it’s revocable, changing the terms of the trust is easy, but you may have to wait until after your divorce is final to do it due to “orders” that go into effect when you file for divorce that prevent you from moving assets. If your trust is irrevocable, it might be necessary to petition the court to change the trustees, and the trust assets themselves may or may not be part of the divorce judgment.
Your State’s Laws on Community Property
Divorcing parties sometimes attempt to shield assets in trusts to keep them out of the pockets of the soon to be ex. When done surreptitiously, this could significantly complicate the divorce. Even when the assets in a trust are separate property, the income from the trust might still be considered for child support and alimony purposes.
Trusts can be affected by divorce, so you should take steps to protect your trust and your intentions. If you are ready to take that step, meet with us for guidance.
One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.