When someone dies and a California trust becomes the roadmap for what happens next, families often assume the trust controls everything. That may not be true if the person was married and the trust fails to treat the surviving spouse fairly. California’s community property system gives the surviving spouse rights that can limit what a trust may distribute to children or other beneficiaries. Add commingling, where separate and marital funds get mixed over time, and you have a recipe for conflict. Many serious trust disputes are fights about property classification before there are fights about trust language.
At Trust Law Partners, we see this storyline in many cases. A trust points one direction. The asset history points another. The people involved are usually siblings and a stepparent, or a surviving spouse and children from a prior relationship. The court then has to decide what belongs to the marital community, what belongs to the decedent alone, and what that means for the final split. Those rulings often change distributions by large amounts.
Community property basics
California law starts with a presumption: property acquired during marriage is community property. Each spouse owns an equal one-half interest, even if only one spouse earned the income or signed the purchase documents. Community property includes salary, retirement contributions, homes bought during marriage, and investments funded with marital earnings.
Separate property is different. It includes property owned before marriage, and property received during marriage by gift or inheritance to one spouse alone. Separate property can remain separate, but only if it is handled consistently and is traceable. Title alone does not control. An asset titled in one spouse’s name or placed into that spouse’s trust can still be community if it was acquired during marriage or was shaped by marital contributions.
Where commingling enters the picture
Commingling is mixing separate and community assets so thoroughly that their origins become hard to track. Couples commingle without thinking about future disputes. They deposit separate funds into joint accounts, use marital earnings to improve a house one spouse bought before marriage, or refinance property using community credit. Years later, those choices can create legal headaches.
- A spouse deposits an inheritance into a joint account that also receives paychecks, then uses that account to buy securities or fund a trust.
- A home purchased by one spouse before marriage has its mortgage principal paid down with marital earnings and is renovated using joint funds.
- Separate property is sold and the proceeds are rolled into a new property acquired during marriage without records tying the proceeds to the purchase.
- A business started before marriage is expanded during marriage using marital labor or money.
After death, someone may have to show what portion of an asset came from separate sources and what portion came from the marital community. If the records are incomplete, courts lean on the community presumption.
Second marriages and blended families
Community property issues are especially sharp in second or later marriages. A spouse may create a revocable trust leaving most assets to children from a first marriage. The trust may say the family home or an investment account is “my separate property.” The surviving spouse can still claim a one-half community interest if the home was bought during the second marriage or if marital earnings were used to maintain it. Children may view that claim as an effort to take their inheritance. From the court’s viewpoint, the question is simpler: what did the decedent legally own, and what did the community own?
These cases also involve quasi-community property. This is property acquired while the couple lived outside California that would have been community property if they had lived here at the time. After death, quasi-community property is treated like community property for distribution purposes. That sometimes surprises beneficiaries who assumed out-of-state assets belonged only to their parent.
Trust funding does not wipe out spousal rights
A revocable living trust cannot give away what the trustor did not legally own. If a married trustor transfers community property into a trust that benefits only their children, the trust can control only the trustor’s half unless the other spouse signed a valid agreement giving up their share.
California Family Code also restricts certain transfers of community property without spousal consent. Real property transfers into a trust are a common example. If a spouse’s signature was required and missing, the surviving spouse can ask the court to set aside the transfer as to their half. The result may be that the spouse takes their interest outright, leaving only the other half for trust beneficiaries.
Transmutation and why labels often fail
Spouses may change the character of property by a written agreement, called a transmutation. California courts demand strict compliance. The agreement must be in writing, signed by the spouse whose interest is affected, and must clearly state the intent to change the property’s status. Casual references in a trust or a deed that simply refer to assets as “separate property” often do not qualify.
So, if a trust states that a home is separate property, but the home was acquired during marriage with marital earnings, that label will not carry the day. The court will look at acquisition dates, payment history, and any valid transmutation documents. Without a proper transmutation, default rules apply.
Tracing and the burden of proof
When commingling is alleged, tracing becomes the main event. The spouse or beneficiary claiming a separate property interest must trace the asset back to a separate source. That requires documents. Bank statements, escrow files, loan documents, tax returns, receipts for improvements, and business financials all matter.
If evidence is strong, a court may confirm the separate interest and allocate only a portion to the community. If evidence is thin, the court may decide the asset is community or partly community beyond what a party expected. This is why early document collection shapes outcomes.
Reimbursement and partial community interests
Even when an asset started as separate property, community contributions can create rights for the surviving spouse. With real estate, marital earnings used to pay mortgage principal or finance improvements can give the community a share of appreciation, not just repayment of principal.
Community contributions can also support reimbursement claims. If marital funds paid for improvements on a separate property home, the community may be reimbursed for those contributions. If separate funds were used to buy or improve a community asset, the contributing spouse can seek reimbursement if the contribution is traceable. These calculations can be technical and may often require a forensic accountant.
Trustee duties when ownership is disputed
Trustees are fiduciaries. They must identify trust property, protect it, and treat beneficiaries fairly. When a surviving spouse raises a community property claim, a trustee cannot ignore it. Distributing disputed assets before resolving ownership can expose the trustee to a surcharge later. Trustees also must provide beneficiaries with accurate information, including how key assets are being classified.
A careful trustee will pause, gather records, and seek court guidance if needed. Probate Code petitions for instructions allow trustees to ask a judge to confirm how a disputed asset should be treated before distribution. This protects the trustee and helps keep the trust from paying twice.
What beneficiaries should do when commingling is in the mix
Beneficiaries often feel blindsided when a spouse’s community claim reduces an inheritance. The right response is to gather and present evidence. Beneficiaries can request a formal accounting, demand supporting records, and ask the trustee to explain the basis for any classification.
If answers do not come, beneficiaries can petition the court to compel an accounting and obtain discovery. In large estates, hiring a tracing expert early can pin down whether the spouse’s claim is solid or inflated, and may provide a factual anchor for mediation.
How courts resolve these disputes
Many community property trust disputes can be settled once tracing clarifies the numbers. Settlement may involve selling a disputed property and splitting proceeds, paying a reimbursement amount, or restructuring distributions.
If settlement fails, the court decides how to assign interests in the property. Judges apply the community property presumption, review tracing evidence, and issue orders reclassifying assets or awarding reimbursements. Those orders can override trust language because the trust controls only the share the decedent owned.
Practical planning lessons
- Use a valid transmutation agreement if spouses want to change property character.
- Keep separate property funds in separate accounts and retain statements.
- Track major contributions to real property, especially mortgage principal and renovations.
- Update trusts after remarriage and address spousal rights directly.
Families often learn these lessons only after a family member dies. At that stage, litigation or a settlement built on solid proof is the only path to clarity.
Community property and commingling disputes are among the most common drivers of trust litigation in California. Resolution of these disputes determines who owns high-value assets and who receives them after death. A trust can express intent, but it cannot rewrite marital property law. Surviving spouses have strong protections, and beneficiaries have strong rights as well. The outcome depends on documents, tracing, and a focused litigation plan.
Trust Law Partners handles serious trust and estate disputes across California, including cases where community property rights and commingling change the distribution picture. If you are a beneficiary facing a spouse’s claim, or a surviving spouse seeking your lawful share, we can evaluate the asset history, develop a strategy, and push for a result that matches the law and the facts.
Call Trust Law Partners today for a free consultation at 833-982-2079.