Community property and trust funds

Question

My husband (we are separated) has a trust fund that was set up by his grandmother before she passed. His grandfather is an inventor and is worth about half a billion dollars so it’s a substantial amount of money. Ok so his mom took out a loan on my husbands trust to pay for a house she purchased for 3.5 million dollars. Now my husband and I lived with her in her guest house when she took the loan out. So since she took out a loan on his trust and his name was attached to it as well does that make it community property? I am in California.

Robert Kane · Answer

The trust is likely separate property.

James L. Arrasmith · Answer

In California, property acquired during marriage is typically considered community property, but there are important exceptions, particularly when it comes to inheritances and trusts. A trust fund set up before marriage or received as a gift or inheritance is generally considered separate property, even if funds are used during the marriage. If your husband's trust was established before your marriage, it likely remains his separate property. 
 
However, the situation may become more complicated if income or benefits from the trust were commingled with marital assets, or if community funds were used to maintain or improve property purchased with the trust funds. The loan taken out on the trust by his mother, especially if it involved his name, may raise questions about whether any community property contributions were made. 
 
You may want to investigate whether community funds were used in any way that could affect your share in the divorce, as California courts will look at how the assets were handled during the marriage. It's important to fully understand the details to protect your interests.

Q: Community property and trust funds