The Importance of Establishing a Separate Property Trust
California is a community property state, meaning that most property owned by spouses is considered the joint property of either spouse or may be subject to asset division in the event of divorce, whether or not such property was titled only in the name of one spouse (and not both names).
If a married person receives an inheritance, they would be wise to stop and think where such inheritance would be “deposited”. If it is “deposited” into a joint account (or if real property is titled under both spouses' names), such inheritance will be inadvertently commingled and transmuted into community property - and now, it becomes "divisible" in divorce, and accessible to both spouses' creditors.
Alternatively, a married person can choose to have their inheritance “deposited” in a Separate Property Trust, where it becomes earmarked as the sole and separate property of the recipient and is fully shielded from division in divorce, while also protected from Probate at death.
Couples who plan to marry and plan to execute a prenuptial agreement would be wise to set up such Separate Property Trusts to be the “receptacle” of the very sole and separate property which the prenuptial agreement contemplates to keep separate and apart during the marriage.
These are just a few reasons to consider establishing a Separate Property Trust. If you would like to learn more about your Estate Planning options, please contact Law Offices of Maria N. Jonsson, PC. We proudly serve clients in Marina del Rey, Venice, Playa del Rey, and the surrounding areas.
What Are the Benefits of a Separate Property Trust?
As California is a community property state, if you and your spouse ultimately divorce, all property and assets that you share or that you have accumulated during the course of your marriage will be subject to asset division, with some exceptions.
Separate Property Trusts can protect both you and your spouse in the event of a divorce. However, there are many other benefits of establishing this type of Trust.
Separate Property Trusts can be used to:
- Clearly distinguish separate property solely belonging to either spouse in a marriage
- Protect children from a previous marriage and their right to inherit
- Protect personal assets from financial risks brought on by the other spouse
- Ensure that new children (if a spouse remarries) do not have access to certain assets titled in the separate property Trust
- Safeguard large inheritance received by a spouse during the marriage