In this article, you can discover…
- How community property laws can impact assets in a divorce.
- Whether placing your business in a trust can help protect your business in a divorce.
- What happens when your adult child mixes business assets with their marital assets.
How Does California’s Community Property Law Impact Business And Real Estate Ownership In A Divorce?
California is a community property state, meaning that any income or assets acquired during a marriage are typically considered shared and split 50-50 in a divorce, even if one spouse played a more active role in acquiring or managing them.
That includes businesses or real estate that grow significantly in value during the marriage. Even if a business starts small and grows through one partner’s efforts, it may still be considered community property if that growth happened during the marriage.
In your effort to protect a family business from divorce in California, you will do well to use a trust as part of your estate plan, as well as consider a prenuptial or postnuptial agreement to define ownership and avoid disputes in the future.
Should I Put My Business Assets In A Trust To Protect Them From Divorce Settlements?
Placing business assets in a trust can certainly help shield them from probate and clarify ownership in the event of divorce or death. However, how effective trusts are be depends on:
- The type of trust and the specific terms written into it.
- Whether the business was started before or during the marriage.
- How the trust categorizes the business, whether as community property or separate property.
Even with a trust in place, California’s community property laws still apply. That’s why it’s wise to pair a trust with a prenup or postnup to clearly define who owns what and ensure that your business can be retained after divorce.
Ranvir Sandhu of Insight Legal in California is a trusted advisor to business owners and families navigating the complex intersection of divorce, community property laws, and estate planning. With extensive experience protecting closely held businesses and real estate assets in high-stakes divorces, Ranvir Sandhu and his team have helped countless clients safeguard what matters most through carefully structured trusts and marital agreements. Their practical, forward-thinking approach has prevented years of costly legal disputes.
If you're a business owner or real estate investor concerned about asset protection, now is the time to get proactive, so reach out to Insight Legal today.
What Happens If My Child Mixes Business Or Real Estate Funds With Marital Assets In California?
This is a very common and expensive mistake. If your child started a business or owned real estate before marriage but later mixes commingles those assets with their spouse’s money or labor, the asset could be considered community property. This means the spouse may have a claim to a share of the business or real estate in a divorce.
To avoid this, be sure to do the following:
- Keep all business and personal finances strictly separate.
- Do not use joint accounts or marital funds to support the business.
- Avoid having the spouse contribute time, labor, or expertise to the business. Doing so could establish a claim based on their involvement in it.
- Use a separate trust to hold business or real estate assets individually.
In short, the more “separate” an asset is kept, the more likely it is to remain protected in divorce proceedings.
How Can An Estate Planning Attorney Help Protect Business And Real Estate Assets From Divorce?
An experienced estate planning attorney can offer tailored strategies to help protect your assets, especially when a business or real estate is involved. For example, they might recommend setting up a separate trust to hold individual assets or creating a joint revocable trust that clearly outlines which property is separate and which is shared.
They can also include a statement of intent within the trust, detailing how each asset should be handled in the event of divorce or death. Just as importantly, they ensure your trust aligns with any prenuptial or postnuptial agreements to maintain consistency and enforceability.
Some Additional Thoughts
Business owners should take care not to commingle their personal finances with their business assets. Doing so may open the door to a legal theory known as piercing the corporate veil, which can strip away the legal protections of the business structure that you’d otherwise enjoy. If you aren’t treating your business like a separate legal entity, courts may not treat it that way, either.
The takeaway? Keep it separate, keep it documented, and keep it protected.
Still Have Questions? Ready To Get Started?
For more information on protecting family business from divorce in California, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (510) 516-2889 today.
Ranvir Sandhu of Insight Legal in California is a trusted advisor to business owners and families navigating the complex intersection of divorce, community property laws, and estate planning. With extensive experience protecting closely held businesses and real estate assets in high-stakes divorces, Ranvir Sandhu and his team have helped countless clients safeguard what matters most through carefully structured trusts and marital agreements. Their practical, forward-thinking approach has prevented years of costly legal disputes.
If you're a business owner or real estate investor concerned about asset protection, now is the time to get proactive, so reach out to Insight Legal today.
