Divorce and its Impact on Estate Planning

An issue often overlooked while going through a divorce is the critical impact it may have on an estate plan (i.e. will, trust, and other documents). Here, we’ll focus on the impact that a divorce can have on an existing trust and why it’s important to have your trust reviewed by a licensed California estate planning attorney after you’ve filed for divorce. A thorough review can possibly prevent undesirable outcomes that were unanticipated at the time of establishing the trust. The terms of trust, it’s structure, and the type of trust established will determine what adjustments can be made to protect your interest. Below are a few factors that should be considered.

Community Property

California is a community property state, which means that subject to a few exceptions, all the property that you and your spouse acquired during marriage will be put into a “pot” by the court and divided equally. In many instances, one or both of the divorcing parties may attempt to create a trust with the purpose of preventing the other from having access to certain assets. However, the reality is that even those assets held in trust may be considered an income source by the court, and thus, such may be used for payment of spousal or child support.

A review of the trust can help you determine how the court will likely classify the type of property within your trust, so you’re not taken by surprise by how property is handled during divorce proceedings.

The Structure of Your Trust

A properly drafted trust will name a trustee and at least one beneficiary, but what happens when the person named is the spouse who is being divorced?  The primary question is whether your intentions have changed now that the marriage is ending. If they have, consider discussing with an attorney the amendments that should be made to reflect your new wishes regarding your assets once the divorce is finalized.

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Is Your Trust Irrevocable or Revocable?

The nature of your trust (irrevocable or revocable) may have an impact on the degree of difficulty in making changes during a divorce. An irrevocable trust is considered more permanent and will require court involvement to change the terms that were originally drafted. On the other hand, a revocable trust provides more flexibility to the creator by allowing amendments without court intervention. Nonetheless, in both cases, it’s important to wait until the finalized divorce decree has been issued by the court before attempting to make changes to an existing trust. Without a decree in hand, your attorney may design an estate plan that doesn’t align with court orders and create a new set of issues as a result.

In closing, a trust can be affected by the outcome of a divorce, even if the divorce has ended on “good terms.” We invite you to meet with us to discuss your individual situation and what adjustments should be made to protect your interests. In most cases, questions and issues with your trust can be addressed during a planning session here in our office or from the convenience of your home with our online video platform.

We are here to help protect what’s most important to you.  Contact us today to learn more at (323) 405-7017 or click on the “Get Started” button to schedule your planning session.

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