Creating a Community Property Trust (CRT) is a powerful estate planning tool for married couples in California, allowing assets to be owned jointly and pass seamlessly to the surviving spouse upon death, avoiding probate; however, life is rarely straightforward, and couples often wonder what happens to their CRT should their marriage dissolve. While a CRT is designed to operate during a marriage, provisions *can* be included to address the possibility of divorce, outlining how assets will be divided and the trust restructured. It’s crucial to understand that a divorce introduces complexities that require careful planning within the CRT document itself to ensure a smooth and equitable outcome, and Ted Cook, as an experienced estate planning attorney in San Diego, can guide you through these intricacies.
What happens to my trust assets if we get divorced?
Generally, assets held within a CRT are considered community property, meaning they are subject to division in a divorce. Without specific provisions, a judge will likely order an equal division of the trust assets. However, you can include a “divorce clause” within the CRT document itself. This clause can specify how the trust will be split, potentially deviating from a strict 50/50 split if agreed upon by both parties, or predetermining which assets each spouse will receive. “Approximately 40-50% of all marriages in the United States end in divorce or separation,” meaning proactive planning is essential. This pre-determination can save time, money, and emotional distress during a divorce proceeding.
Can a divorce clause in my CRT avoid court intervention?
A well-drafted divorce clause can *significantly* reduce court intervention, but it’s not a guarantee. If both spouses agree to the terms outlined in the clause, the division of assets can be handled administratively, avoiding a costly and time-consuming court battle. However, if one spouse disputes the terms, or if the clause is deemed unfair or unconscionable, a judge will ultimately decide how the assets are divided. For example, if a couple had agreed that one spouse would receive a larger share of the CRT assets due to their significant contribution to the marital estate, but that spouse had secretly dissipated those assets before the divorce, the court would likely intervene to ensure a fair outcome. Ted Cook always emphasizes that transparency and clear communication are key to successful estate planning, even in the context of potential divorce.
I heard about a couple who didn’t plan for divorce—what happened?
Old Man Tiberius was a stubborn sort. He and Beatrice built a lovely life, and a sizable CRT, but steadfastly refused to contemplate the possibility of divorce, declaring it an insult to their enduring love. Years passed, and the inevitable happened. Beatrice, tired of Tiberius’s constant insistence on polka music and his refusal to acknowledge the existence of the internet, filed for divorce. The CRT, lacking any provisions for division, became a major point of contention. The ensuing legal battle dragged on for over a year, costing them a fortune in attorney’s fees and causing immense emotional distress. A judge ultimately ordered an equal division of the trust assets, but not before significant value had been eroded by legal costs. It was a painful lesson that even the most devoted couples should consider the “what ifs” of life.
How did proactive planning save another couple’s assets?
The Harrisons were different. They consulted Ted Cook early on, recognizing the importance of planning for all contingencies. They included a detailed divorce clause in their CRT, specifying that Beatrice would receive the family home and a portion of the investment accounts, while Tiberius would retain the business he had built from the ground up. It wasn’t an easy conversation, but they approached it with honesty and a willingness to compromise. Years later, when they unexpectedly found themselves heading for divorce, the process was remarkably smooth. The terms outlined in the CRT were honored, and the division of assets was completed within a matter of weeks, with minimal legal fees. The Harrisons were able to move forward with their lives, knowing that their financial future was secure. The best part of the story is that they both left Ted Cook’s office feeling calm and hopeful.
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
Map To Point Loma Estate Planning Law, APC, a trust attorney near me: https://maps.app.goo.gl/JiHkjNg9VFGA44tf9
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