California Family Code Section 2040 imposes a number of restrictions on the transfer of property for spouses going through a divorce, also known as automatic temporary restraining orders (ATROs). These restraining orders remain in effect until the petition for dissolution of marriage is dismissed, a judgement is entered, or the court makes an order. The Code Section states:

(a) In addition to the contents required by Section 412.20 of the Code of Civil Procedure, the summons shall contain a temporary restraining order:

(1) Restraining both parties from removing the minor child or children of the parties, if any, from the state, or from applying for a new or replacement passport for the minor child or children, without the prior written consent of the other party or an order of the court.

(2) Restraining both parties from transferring, encumbering, hypothecating, concealing, or in any way disposing of any property, real or personal, whether community, quasi-community, or separate, without the written consent of the other party or an order of the court, except in the usual course of business or for the necessities of life, and requiring each party to notify the other party of any proposed extraordinary expenditures at least five business days before incurring those expenditures and to account to the court for all extraordinary expenditures made after service of the summons on that party.

Notwithstanding the foregoing, nothing in the restraining order shall preclude a party from using community property, quasi-community property, or the party’s own separate property to pay reasonable attorney’s fees and costs in order to retain legal counsel in the proceeding. A party who uses community property or quasi-community property to pay his or her attorney’s retainer for fees and costs under this provision shall account to the community for the use of the property. A party who uses other property that is subsequently determined to be the separate property of the other party to pay his or her attorney’s retainer for fees and costs under this provision shall account to the other party for the use of the property.

(3) Restraining both parties from cashing, borrowing against, canceling, transferring, disposing of, or changing the beneficiaries of any insurance or other coverage, including life, health, automobile, and disability, held for the benefit of the parties and their child or children for whom support may be ordered.

(4) Restraining both parties from creating a nonprobate transfer or modifying a nonprobate transfer in a manner that affects the disposition of property subject to the transfer, without the written consent of the other party or an order of the court.

(b) Nothing in this section restrains any of the following:

(1) Creation, modification, or revocation of a will.

(2) Revocation of a nonprobate transfer, including a revocable trust, pursuant to the instrument, provided that notice of the change is filed and served on the other party before the change takes effect.

(3) Elimination of a right of survivorship to property, provided that notice of the change is filed and served on the other party before the change takes effect.

(4) Creation of an unfunded revocable or irrevocable trust.

(5) Execution and filing of a disclaimer pursuant to Part 8 (commencing with Section 260) of Division 2 of the Probate Code.

(c) In all actions filed on and after January 1, 1995, the summons shall contain the following notice:

“WARNING: California law provides that, for purposes of division of property upon dissolution of marriage or legal separation, property acquired by the parties during marriage in joint form is presumed to be community property. If either party to this action should die before the jointly held community property is divided, the language of how title is held in the deed (i.e., joint tenancy, tenants in common, or community property) will be controlling and not the community property presumption. You should consult your attorney if you want the community property presumption to be written into the recorded title to the property.”

(d) For the purposes of this section:

(1) “Nonprobate transfer” means an instrument, other than a will, that makes a transfer of property on death, including a revocable trust, pay on death account in a financial institution, Totten trust, transfer on death registration of personal property, revocable transfer on death deed, or other instrument of a type described in Section 5000 of the Probate Code.

(2) “Nonprobate transfer” does not include a provision for the transfer of property on death in an insurance policy or other coverage held for the benefit of the parties and their child or children for whom support may be ordered, to the extent that the provision is subject to paragraph (3) of subdivision (a).

(e) The restraining order included in the summons shall include descriptions of the notices required by paragraphs (2) and (3) of subdivision (b).

Prohibited Actions

Some actions are prohibited entirely during the divorce process. The prohibited actions include cashing, borrowing against, canceling, transferring, disposing of, or changing the beneficiaries of any insurance or other coverage, including life, health, automobile, and disability, held for the benefit of the parties and their child or children for whom support may be ordered. See California Family Code Section 2040(a)(3), above.

Prohibited - Subject to Spousal Consent or Court Order

Some actions are prohibited unless the spouse consents or the court makes an order. These include transferring, encumbering, hypothecating, concealing, or in any way disposing of any property, real or personal, whether community, quasi-community, or separate (e.g., the making of a gift by one spouse), except in the usual course of business or for the necessities of life, and creating a nonprobate transfer or modifying a nonprobate transfer in a manner that affects the disposition of property subject to the transfer (e.g., changing beneficiary designations). See California Family Code Sections 2040(a)(2) and 2040(a)(4), above.

Allowed - Upon Notice to Spouse

Other actions are allowed so long as notice of the change is filed with the court and the spouse is provided with notice. These include the revocation of a nonprobate transfer, including a revocable trust, pursuant to the instrument and the elimination of a right of survivorship to property. See California Family Code Sections 2040(b)(2) and 2040(b)(3), above.

Allowed Without Restriction

A spouse may take the following actions without providing notice to the spouse or the court: (a) create, modify, or revoke a Will, (b) create an unfunded revocable or irrevocable trust, or (c) modify a nonprobate transfer in a way that does not affect the disposition of the property (e.g., modifying the successor Trustee provisions). See California Family Code Sections 2040(b)(1), 2040(b)(4), and 2040(a)(4), above.

Because of the restrictions involved, many couples who are going through the divorce process will often create an estate plan utilizing revocable living trusts, but wait to fund the trust until the divorce has been finalized.