Divorce isn’t just an end to your relationship—it’s the separation of your lives in a complete and legal manner. As a California estate planning law firm, we frequently see the significant impact divorce has on valuable assets—and the further challenges that arise if you don’t properly handle the transfer of assets during and following this separation.
It’s critical to understand how your estate is affected during this time for asset protection purposes, especially when those assets fall under California’s automatic temporary restraining orders (ATROs). These legal constraints are designed to prevent either party from making unilateral changes to their financial and estate plans during the pendency of the divorce. This is especially important for business owners who have business interests to protect during the proceedings.
Understanding the Automatic Temporary Restraining Orders During a California Divorce
California Family Code section 2040 imposes ATROs on both parties during a divorce. These orders become binding on the petitioner upon filing and on the respondent upon service of the summons. ATROs prevent certain actions, such as transferring or selling jointly-owned property, altering nonprobate transfers, or making significant financial changes, unless both parties agree in writing or obtain a court order.
For estate planning purposes, ATROs specifically limit modifications to nonprobate transfers, like revocable trusts. While these restrictions prevent actions that could alter the distribution of property, they do allow some flexibility. For example, parties may create, modify, or revoke a will at any time during the divorce. Similarly, revocable trusts may be revoked, provided notice is filed and served on the opposing party before the change takes effect.
The key purpose of these restrictions is to maintain fairness and transparency while ensuring that no assets are improperly transferred or disposed of without both parties’ knowledge.
Nonprobate Transfers of Assets During the Pendency of Divorce
Nonprobate transfers, such as trusts, are subject to specific rules during a California divorce. While you cannot transfer property into a trust during the proceedings without consent or court approval, you may be able to create an (almost) unfunded trust. An unfunded trust is one that contains no, or very little assets at the time of its creation, but it may serve as a placeholder for future transfers.
Such trusts are particularly useful if a pour-over provision in your will directs assets into the trust upon your death during the divorce. Additionally, once the court approves the transfer of certain assets, those assets can be moved into the trust without any additional delay. Drafting a trust during a divorce allows for immediate action once restrictions are lifted or agreements are finalized.
ATROs are temporary measures, meaning they can be modified or lifted with written consent from the other party or through a court order. This provides an opportunity to plan strategically while adhering to the legal constraints.
Protect Your Estate and Your Assets in California
Having sound legal support during this time of transition allows you to take on unique challenges for managing your estate with confidence. Dahl Law Group works with California business owners, families, and individuals to protect their assets and ensure compliance with the relevant laws at the time of transfers and transactions relevant to your estate. Contact our offices in Sacramento or San Diego today to discuss your estate planning needs and how we can help you protect what matters most during this critical time.
Dahl Law Group
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