Divorce changes everything about your financial life, including your estate plan. If you created a will, trust, or other estate planning document during your marriage, these need immediate attention once divorce proceedings begin. Failing to update these critical documents can leave your assets in the wrong hands and create legal battles for your loved ones.
During and after a divorce is a critical time for your estate plan and trust assets. Here’s what you need to know to protect your family and future.
Why Estate Plans Must Be Updated During Divorce
When you divorce, your existing estate plan likely names your soon-to-be ex-spouse as a beneficiary, executor, or trustee. Without updates, your former spouse could inherit assets you never intended them to receive. Divorce alone is not enough to ensure that they are removed as your beneficiary, executor, or trustee.
Key documents requiring immediate updates include:
- Last will and testament
- Revocable living trusts
- Beneficiary designations on retirement accounts
- Life insurance policies
- Financial powers of attorney
- Healthcare directives
California law provides some automatic protections after a divorce is finalized, but it is risky to rely on this alone. Being proactive during the divorce process is the best way to protect your rights, your future, and your loved ones.
The Bock & Plummer Advantage in Estate Planning & Probate Matters
At Bock & Plummer, Attorneys at Law, partners Heidi Plummer and Michael Bock bring decades of combined experience handling estate planning and probate. When divorcing couples need estate planning guidance and assistance, they can turn to our estate & probate attorneys to help them protect their future and their most valuable assets.
We often work with the local Irvine divorce lawyers at RM Law Group to ensure that you’re not just legally divorced, but also financially protected and properly positioned for your new chapter in life.
Divorce creates urgent estate planning needs that cannot wait until the divorce is finalized. Immediate action from experienced attorneys protects your assets and ensures your wishes are legally enforceable.
When Couples Divorce: Who Gets the Trust Money?
Trust money can cause big fights when a couple gets divorced. Many people assume they automatically receive half of all marital property, including trust assets. But that’s not how it always works. Several things decide who gets what from the trust.
Is It Shared Money or Personal Money?
California follows community property laws. This means that assets acquired during marriage are generally split equally. If someone puts money in a trust before getting married, that money usually stays theirs alone. However, if they added money or assets to the trust after getting married, the courts may decide that the trust belongs to both spouses.
Revocable vs. Irrevocable Trusts
Revocable trusts can be changed easily, but they don’t protect your money much during a divorce. Since you still control the trust, courts usually treat it like your regular assets when splitting things up. Irrevocable trusts are harder to change and offer better protection. However, judges might still look closely at why and when you created the trust to decide if it’s really separate from your other assets.
Trust Timing and Intent
Courts scrutinize trusts created shortly before or during divorce proceedings. If a trust appears designed to hide assets or avoid property division, judges may “pierce the trust veil” and include those assets in the marital estate.
Immediate Steps to Take During Divorce
If you’re facing divorce and have existing estate planning documents, take these steps immediately:
- Document Review. Compile all estate planning documents, including wills, trusts, powers of attorney, and beneficiary designations. Review each document to identify provisions related to spouses that require updates.
- Temporary Protective Measures. You should think about setting up new trusts to take effect after your divorce is finalized. This way you can protect your assets without anyone saying you tried to hide money during the divorce. Courts don’t like it when people move money around during a divorce, so waiting until everything is done can keep you out of trouble.
- Beneficiary Updates. Update beneficiary designations on retirement accounts, insurance policies, and financial accounts. These changes often take effect immediately and provide crucial protection.
Moving Forward After Divorce
Once your divorce is finalized, you will want to redo your entire estate plan. This means way more than just crossing out your ex’s name on papers. Here are the most important things to fix first:
- New Beneficiary Selection. Choose appropriate beneficiaries for all assets, including contingent beneficiaries in case primary choices cannot inherit.
- Guardian Designations. If you have minor children, update guardian designations in your will and consider creating separate guardian provisions for different scenarios.
- Trust Restructuring. Evaluate whether existing trust structures still serve your goals. Post-divorce circumstances may require different trust types or modification of existing trust terms.
- Tax Planning. Divorce changes your tax situation significantly. Ensure your estate plan incorporates these changes for optimal tax efficiency.
Common Misconceptions About Trust Assets in Divorce
Many people hold incorrect assumptions about trust property protection during divorce. These misconceptions can lead to costly mistakes and long legal battles.
“My trust protects all assets from divorce.”
This belief is false. Trust protection depends on the trust type, funding source, and timing. Community property laws still apply to many trust assets acquired during marriage.
“I can quickly move assets into a trust to protect them.”
Last-minute asset transfers raise red flags with courts. Judges may view these actions as fraudulent transfers and reverse them entirely.
“My spouse has no claim to my family trust.”
While family trusts often contain separate property, any income generated during marriage or community property contributions may create spouse claims.
Contact Bock & Plummer
Contact Bock & Plummer, Attorneys at Law, today at 714-966-2383 or fill out our confidential contact form, and we’ll set up a meeting to review your situation.
Don’t leave your estate plan to chance during this critical time. The decisions you make now will impact your family’s financial security for years to come.