Family Code 761 is All About "Trust", But Not the Kind You Think

Got a living trust? Going through a divorce? Then you need to know about Family Code 761

Family Code 761 explains how a living trust may affect community or separate property

Family Code 761 explains to spouses why and how their living trust may affect community and separate property rights. Ready to learn more?

What does Family Code 761 state?

(a) Unless the trust instrument or the instrument of transfer expressly provides otherwise, community property that is transferred in trust remains community property during the marriage, regardless of the identity of the trustee, if the trust, originally or as amended before or after the transfer, provides that the trust is revocable as to that property during the marriage and the power, if any, to modify the trust as to the rights and interests in that property during the marriage may be exercised only with the joinder or consent of both spouses.

(b) Unless the trust instrument expressly provides otherwise, a power to revoke as to community property may be exercised by either spouse acting alone. Community property, including any income or appreciation, that is distributed or withdrawn from a trust by revocation, power of withdrawal, or otherwise, remains community property unless there is a valid transmutation of the property at the time of distribution or withdrawal.

(c) The trustee may convey and otherwise manage and control the trust property in accordance with the provisions of the trust without the joinder or consent of either spouse unless the trust expressly requires the joinder or consent of one or both spouses.

(d) This section applies to a transfer made before, on, or after July 1, 1987.

(e) Nothing in this section affects the community character of property that is transferred before, on, or after July 1, 1987, in any manner or to a trust other than described in this section.

Why is Family Code 761 important for spouses who have trusts?

Family Code 761 is important for the following reasons.

  • Section 761 states community property transferred into a trust remains community property during the marriage but then provides limitations to that statement depending on the type of trust (revocable or irrevocable) and the trust's language.
  • Section 761 explains how to revoke a trust but also explains what happens to trust assets that are community property after revocation.
  • Notice section 761 consistently states "unless the trust", "trust instrument" or "instrument of transfer" states otherwise. That tells the reader it is important for the spouses to consult with an experienced estate-planning attorney who can help them understand how the language of the trust or transfer may affect these issues.

Final thoughts on Family Code 761

Family Code 761 states general rules regarding trusts and how they may affect community and separate property rights. The rules are "general" because the trust documents may differ from what the code states. The synergy between the Family Code, California case law and the trust instrument requires the experience of a family law attorney and, separately, an estate planning attorney. There are no shortcuts if you want to be sure how your living trust may impact your community and separate property rights.

The California Family Code is complex. For the person who tries to represent himself or herself, it is also confusing. Please do not attempt to navigate the Family Code or your family law case on your own. Experienced and intelligent family law representation can help you avoid potential, irreversible mistakes. Good men and women deserve great family law representation.

We hope you enjoyed this article on Family Code 761.

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