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How are trust funds divided in a divorce?

When a marriage comes to an end in California, a primary concern is often the division of property. This process can become more complicated when it involves trust funds.

Trust funds are financial assets held in a trust controlled by a trustee for the benefit of one or more beneficiaries. Understanding how trust funds divide in a California divorce can help you navigate this challenging process more smoothly.

Determining the type of trust

The first step involves identifying the type of trust. If you are the beneficiary of a trust set up by someone outside of the marriage, such as a parent or grandparent, this is generally considered separate property. In this case, the trust funds usually are not subject to division in a divorce.

However, if the trust is revocable and you or your spouse created it during the marriage, the court may consider the trust assets as community property.

Assessing separate or community property

In California, the law considers all assets acquired during marriage as community property, subject to equal division in divorce. However, any assets acquired before marriage or during the marriage by gift or inheritance, are typically classified as separate property and remain with the original owner.

If you or your spouse funded the trust with separate property, it will likely remain separate. However, if you funded it with community property or a mix of separate and community property, you would likely need to divide the trust funds equally.

Tracing the source of funds

If you can prove that the source of the trust funds was separate property, such as an inheritance or gift, then the trust may remain separate. Conversely, if the funds came from community property, the trust might be divisible in the divorce.

Keeping separate funds from commingling with community property can help those trust funds stay separate when dividing property during divorce.



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