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Estate Planning and Divorce – What Can Be Done?

On Behalf of | Sep 6, 2023 | Firm News

I occasionally have the situation where my married estate planning clients are dissolving their marriage or I have a new client who is in the middle of a divorce proceeding and they want to do some planning.  There are several considerations that must be considered and addressed in these situations. I will cover only a few.  The issues discussed below also apply to registered domestic partners.

For those clients with an existing trust in place, we look at the terms of the trust to determine how it can be revoked.  Typically, a revocable trust can be revoked by either settlor (also called trustor, grantor or trustmaker) providing a written revocation to the other settlor.  There may be specifics on how that revocation is served such as personal service or by certified mail. It is important to follow the specific instructions in the trust document.

Technically, when a trust is revoked, the title to the assets revert to how they were titled before they were transferred to the trust.  Whether it makes sense for my client to revoke an existing trust is a discussion I have with their dissolution attorney.  I have had rare clients who while they are divorcing, do not want to revoke their trust because they still want to provide for each other.

If the client wants to set up a new estate plan, it is very important to know at what stage they are in the dissolution proceedings.  The main reason I need to know is due to the Automatic Temporary Restraining Orders that are imposed once the summons is served on the respondent.  Generally, the ATROs restrict what either party can do with their assets.  Transferring assets to a new trust naming someone other than the former spouse as a beneficiary would be a violation of the ATROs.  However, a party can create or modify a will and they can create a new trust, but they cannot fund it (i.e., transfer title of assets to the new trust).  I will wait to fund the new trust once there is a marital settlement agreement regarding the division of assets, the dissolution is final (because the ATROs are in place until the dissolution is final) or there is an agreement between the former spouses about the funding of the new trust.  There are various ethical issues in the case where I represented the married couple in establishing the trust.  If one or both former spouses want me to prepare the new plan, I do have to get the consent of both spouses.

The probate code does have some automatic provisions that go into effect once the dissolution is final (the entry of the final judgment).  This includes revoking provisions in a will or a trust that make a distribution to a former spouse and nominating the former spouse as the executor of the will.  Any beneficiary designations naming the former spouse are revoked unless there is an order to retain that designation or there is clear and convincing evidence that the deceased former spouse intended for the former spouse to be the beneficiary.   The naming of the former spouse as the agent under an advance health care directive or power of attorney is revoked as well.  It is important not to rely on these automatic revocations and instead draft new documents.

If someone is considering dissolving their marriage, it is important to review any existing estate planning documents and have a conversation with both your family law attorney and your estate planning attorney.