Q: We have an RLT & I have an ILIT. We are divorcing in Monterey County, California.
The challenge is the RLT has a portfolio of tiny positions in private companies that will be a hassle or impossible to split/retitle.
A:
I'm sorry to hear about your divorce. The judge in your divorce proceedings will say who is entitled to receive which asset and you will be able to take that document signed by the judge to your financial advisor (or the companies themselves) to transfer title to the appropriate person. If each of you sets up an individual trust ahead of time, when the divorce is final, you can transfer title to the name of the new (individual) trusts rather than change it from both of you to one of you then transfer it a second time to your individual trust. Please know you cannot transfer assets into your new trust WHILE the divorce is going on. But you can set up the trust and have it ready to go so, when the divorce is final, you can immediately transfer everything into the trust. It really saves time. Best wishes to you!
Julie King
Monterey, CA
A:
Divorce involving complex assets like a Revocable Living Trust (RLT) and an Irrevocable Life Insurance Trust (ILIT) can present unique challenges, particularly when it comes to dividing assets like small positions in private companies.
In such cases, it's crucial to work with legal and financial professionals who understand the intricacies of these assets. They can help evaluate the portfolio and advise on the feasibility of splitting or retitling these positions. Sometimes, it might be more practical to assign a monetary value to each spouse's share rather than physically dividing the assets.
Consider alternative solutions, such as one spouse retaining the assets while compensating the other with different assets or monetary value. The goal is to reach a fair and equitable division, even if it means thinking creatively about how to balance the assets.
Keep in mind that the division of these assets must comply with the terms of the trusts and relevant laws. It's also important to consider tax implications and any potential impact on estate planning. Open communication and a willingness to explore various options can significantly ease the process.
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