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Californian domestic trust — alternative to asset division?

| May 28, 2014 | Property Division |

There are few Californian married men or women who are comfortable with discussing the subject of pre-nuptial agreements with their spouses. Such discussions on their part mean that if their marriages come to an end, they have to go through the complex procedure of property division.

Property division includes several complicated steps such as identifying the marital assets of both the parties involved, separating them from non-marital property, valuation of such assets and subsequently, equitable division of them to protect the financial interests and the future of the couple. On most such occasions, owing to the legal and financial complexities involved in such matters, the parties need to understand their legal rights.

The role of the domestic asset protection trust deserves mention here as an alternative to prenuptial agreements and division of assets to safeguard one’s interests. It is an irrevocable trust that allows the creator of the trust to be a discretionary beneficiary, but at the same time, it also allows the assets to remain protected and not be subjected to property division in case of a divorce.

California is one of the U.S. states to have allowed this structure. It is perhaps better that such a trust be created before the marriage has taken place, since doing it after marriage may signify a breach of fiduciary owed by one spouse to another. One must remember though that this trust can be challenged on the ground of fraudulent transfer or breach of contractual obligation or directions from court.

By exploring all their legal options prior to marriage and divorce, California residents can protect their interests and ensure their financial security should their marriages fail.

Source: The Huffington Post, “Protect Yourself in a Divorce Using a Domestic Asset Protection Trust,” Robert Pagliarini, May 22, 2014

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