Estate Planning and Your Divorce

Most divorce lawyers are not estate planners yet estate planning is vitally important as part of the divorce process and after the divorce. This is true whether or not you currently have a trust or will, and regardless of your age. Many people believe death is a low probability if they are healthy and of a young age. This may be statistically true, but accidents and unfortunate events do occur, making estate planning a major consideration during and after a divorce. Without such planning, the person you are divorcing, or just divorced, may end up making decisions about your money and healthcare if you become incapacitated; or could receive your share of the community property or a portion of your separate property, if you die.

Your Current Estate Plan or Will

If you have a trust or a will at the time a divorce becomes imminent, it is important to consider revoking the trust and will in conjunction with a general review of your estate plan.  If these documents do not represent your current wishes now that a divorce is imminent, then they need to be revised.  Otherwise, if you die during the divorce process, your estate will be distributed as set forth in those documents.  This could mean that the same spouse you are fighting to keep certain assets from in the divorce may in fact receive those very assets if you die.  If this is not what you want, then you need to revise your documentation to ensure that your separate property and your one-half of the community property are passed to another person of your choosing.

Restraining Orders and Funding a Trust

After any divorce action is filed in the State of California, Standard Family Law Restraining Orders are issued.  One of the restraining orders prevents the funding of a trust.  This means that, upon notice to the other party, you are allowed to revoke an existing trust and can even create a new trust; however, you cannot actually fund the new trust.  You will thus need an interim will which is meant to operate if you die during the divorce. The interim will allows you to provide for the distribution of your separate property and your one-half of the community property.  Upon the conclusion of the divorce action, the restraining orders no longer operate and a trust can be funded with the property (community and separate) awarded to you in the divorce judgment.

Restraining Orders and Beneficiary Designations

Separate from preparing a trust or a will is the question of beneficiary designations on bank accounts, retirement accounts and life insurance policies.  Once a divorce action is filed there is no question that, in accordance with the Standard Family Law Restraining Orders, these beneficiary designations cannot be changed during the divorce proceeding. Whether or not these beneficiaries can be changed before actually filing a divorce action is an open question in the law.  Many lawyers (and probably judges) believe that changing the beneficiary designations near the start of a divorce may be a breach of a fiduciary duty that spouses owe to each other.  It is best to discuss this issue with a family law attorney before changing the beneficiary designations.

Advanced Health Care Directives, Powers of Attorney and Financial Directives

If at any time you have used these documents to name your spouse as the person who has decision-making power over your health care, financial and other similar decisions if you are incapacitated, you may want to reconsider this designation when divorce is imminent.  If you have not documented these rights, then you may want to do so and designate the person you choose. Otherwise, your spouse will be legally the person allowed to make these decisions on your behalf.

Real Property Held as Joint Tenants With the Right of Survivorship

Many married people hold a title to real property that lists their spouse as joint tenant with rights of survivorship. This means that when one spouse dies, the other spouse receives the entire property.  As with other assets discussed above, you may not want your spouse to receive your one-half interest in the property if you die during the divorce.  In California, without the consent of your spouse, but upon giving notice, title can be changed so that it is held as “tenants in common.”  By doing this, each person is allowed to provide in their will who will receive their one-half interest in the property if they die.  It is not sufficient to just have title changed; an interim will must also be prepared stating what will happen to your interest in the house or other real property o which title has been changed.