divorce mediation
divorce mediation
divorce mediation
 
 



Estate Planning

Amending or revoking the documents that determine how a couple's affairs will be handled upon death or incapacity is often overlooked during divorce. It is a mistake to neglect this important part of the divorce mediation process, yet it happens all too often. You may be completely occupied with deciding how to divide your community property, calculate support payments, or work out a custody schedule. The chance that either of you will pass away in the meantime seems remote. Nevertheless, the case law in California is full of examples of how neglecting to plan properly before, during, and after a divorce can be catastrophic.

Here are some of the basic things you need to know about wills, trusts, powers of attorney, and survivor benefits and divorce:

  • Once your divorce is final, a court will automatically invalidate any bequest to your former spouse contained in your will.
  • If you die during the divorce process and you haven't yet revoked your will, your soon-to-be former spouse will be entitled to everything you gave them in the will.
  • A gift to your former spouse contained in a trust agreement is not automatically revoked upon divorce in all cases. To be certain, you should revoke the trust yourself.
  • If you die during the divorce process and you haven't yet revoked your trust, your soon-to-be former spouse will receive everything he or she is entitled to according to the trust.
  • You can freely revoke or amend any power of attorney or health care directive at any point during the divorce process.
  • Some retirement plans are creatures of federal law. As a result, if you forget to change your beneficiary designation to list someone other than your former spouse after divorce, you could encounter trouble.

Wills, Trusts, Powers of Attorney, and Beneficiary Designations, Practically Speaking

Wills

Many divorcing couples simply have two wills, one for each spouse. As noted below, California courts have held that any provision providing for a former spouse in a will is automatically revoked upon divorce. In other words, if you name your spouse as your primary beneficiary upon your death and forget to revoke your will before divorce, a final divorce decree will automatically strip your spouse out of your estate plan. For most divorcing couples, this is good news, as there are other people each spouse would rather benefit.

However, if a spouse dies during the divorce proceedings, but before divorce is final, problems arise. Imagine the following scenario: John and Sue Smith execute wills in 2000 naming each other as the sole beneficiaries of their respective estates. In 2010 they begin the divorce process. Though they are certain they want a divorce, they take their time untangling their affairs, and John dies unexpectedly later that year. Despite the natural implication that John wouldn't want all of his assets flowing to his soon-to-be former spouse, that is exactly what happens. Simply revoking his old will and signing a new one would have taken care of the issue.

Revoking a will is permitted even after you've file a petition for dissolution and a summons has been served and an automatic restraining order is in place.

Living Trusts

Although a divorce or annulment does revoke provisions for a former spouse in a will, it doesn't automatically revoke a living trust in every instance. If you and your spouse have established a living trust, your required course of action depends on where you stand in the overall divorce process.

  • If you haven't yet filed a petition for dissolution, chances are you can revoke your family trust simply by delivering a signed statement to your spouse indicating that you are doing exactly that. In rare circumstances, a trust agreement will require that both spouses consent to revocation. Check your trust agreement to determine if this applies to you.
  • If you've already filed a petition for dissolution and a summons has been served, an automatic restraining order comes into effect that prohibits you from modifying your trust or creating a new trust without the consent of your spouse or a court order. However, you are permitted to revoke your trust by filing and serving notice on your spouse before the change takes effect.
  • Once your divorce is final, you are free to revoke your family trust by sending a signed statement to your former spouse indicating your decision. Again, check your trust agreement to ensure that the consent of both of you isn't required

Powers of Attorney and Health Care Directives

A divorce automatically revokes your appointment of a former spouse as your agent. However, you will certainly want to change your nomination for your primary agent under both your power of attorney and your health directive in the interval between separation and divorce. The Automatic Restraining Order that comes into effect when you file for divorce has no impact on your ability to amend either your power of attorney or your health care directive.

Retirement Plans

The manner in which a retirement plan is administered upon your death is governed by federal law if the underlying plan is also subject to federal law. In short, if dividing the retirement plan upon divorce requires a Qualified Domestic Relations Order (QDRO) upon divorce, and you forget to amend your beneficiary designation after divorce, federal law will control the disposition of that retirement plan upon your death.

The Legal Framework

Revocation of Provisions Relating to Former Spouse Upon Divorce

Section 6122 of the California Probate Code provides that unless a will expressly states otherwise, the provisions of that will providing for the spouse and any nomination of the spouse as executor, trustee, conservator, or guardian are revoked upon divorce. Be warned, however, that if you want to continue to provide for the children of your former spouse after divorce in your will or living trust, you should amend the document and specifically state your intention to do so. Several cases in California have held that provisions in a will executed before divorce that provided for a spouse's children from another relationship are deemed invalid upon divorce. If you intend to provide for your stepchildren even after divorce, you should amend your estate planning documents accordingly.

Revoking a Living Trust

Section 15401(a)(2) of the California Probate Code provides that in addition to any other method of revocation permitted by the trust agreement itself, a trust may be revoked by a signed writing delivered to the trustee during the lifetime of the person who created the trust. However, if the trust instrument specifies a particular method of revoking a trust and makes it the exclusive method of revoking the trust, the signed writing noted above may not have any effect. When in doubt, read your trust carefully to ensure that you won't be violating the terms of the trust by simply handing your spouse a signed letter stating your intent to revoke the trust.

Dividing Specialized Irrevocable Trusts

Some couples with large estates engage in sophisticated planning employing such mechanisms as charitable remainder trusts, life insurance trusts, and qualified personal residence trusts. Dividing these trusts requires specialized knowledge and should not be attempted with the counsel of an experiences trusts and estates attorney.