A Community Property Trust (CPT) is a type of irrevocable trust that is used to manage the separate property of married couples. This type of trust is used to protect the assets of both spouses in the event of death, divorce, or other unforeseen circumstances. It is also used to ensure that the assets of one spouse are not used to satisfy the debts of the other. The CPT is often used in states that recognize community property, which is property acquired during the marriage and deemed to be equally owned by both spouses. There are two main types of Community Property Trusts: the Qualified Terminable Interest Property (TIP) Trust and the Revocable Living Trust. A TIP Trust is a trust that is designed to protect the surviving spouse’s rights to the community property, while allowing the deceased spouse to designate who will receive the trust assets upon death. A Revocable Living Trust is an irrevocable trust that allows the couple to determine who will receive the trust assets and when they will receive them. This type of trust is often used to provide for a surviving spouse in the event of death or divorce.
Community Property Trust
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FAQ
Benefits of Community Property Trusts A community property trust holds assets a married couple jointly owns. Each spouse has equal interests in the property and can use them during their lifetime. When one spouse dies, the property gets a new basis equal to the fair market value at the time of the death.
California is a community property state, so any property acquired during the marriage is generally subject to equal distribution between the spouses in the event of divorce. In California, trusts established before marriage are generally considered separate property.
A Florida Community Property Trust (FLCPT) is a joint trust that holds the assets of a married couple, and, while both spouses are alive, the assets generally may be used for their benefit.
California is a community property state. This means everything you earn or acquire during your marriage belongs to each spouse equally. Attempts to put more assets than are rightfully yours into a trust will not override the community property law.
How to Protect Assets from Divorce. In many states, including California, property owned by a spouse before he or she is married is considered separate property and is not divided between spouses when they divorce. Trusts, if established before the marriage, are also considered separate property.
Property you didn't earn, like a gift or inheritance one of you received while married, is not community property. Generally, a loan to pay for one spouse's education or training (student debt) is treated like that spouse's separate property. After you divorce, that spouse will be responsible for their student debt.
In California, trusts established before marriage are considered separate property. Other trusts ? including domestic or foreign asset protection trusts, revocable trusts and irrevocable trusts ? also protect assets in the event of divorce.
What happens to a Living Trust after a divorce? All trusts require three things: a Creator (Trustor or Grantor), a Trustee, and trust property. Once the court orders a property division between the two former spouses, the trust no longer has assets in it and it evaporates as a matter of law.