Family law includes nearly every area of law; however, the purpose of this blog post is to explore some estate planning considerations in the context of a divorce. This post is limited to estate plans drafted in California and divorces taking place in California, as each state may have different laws.
If you have an estate plan in place with your spouse, you first need to determine whether the estate plan is revocable or irrevocable. For purposes of this post, only revocable living trusts will be discussed. If you are getting a divorce and only one spouse has a copy of your current estate plan, you should call your current estate planning attorney and secure another copy. Spouses often get nervous about requesting estate plans and tax documents from their respective professionals; but, to help you in your divorce case, these documents must be secured.
There are two main types of revocable trusts: a revocable living trust and a testamentary trust.
A revocable living trust is the most common type of trust drafted in California. There are different versions of these trusts (e.g., probate avoidance trusts, bypass trusts, QTIP trusts…etc.), but the main goal of these trusts is the same—to avoid probate court. Probate court is a time-consuming (approximately 12-16 months) and expensive (typically in excess of $10,000) process, which can most often be avoided by having a properly drafted trust, which has assets properly moved into the trust.
A testamentary trust is a type of trust that is created by a will. A testamentary trust is less common in California due to wills having to pass through the aforementioned time-consuming, expensive probate court process.
Having a revocable living trust is common in a divorce case.
With a revocable living trust, you may first want to confirm that there is a provision clearly stating that any property transferred into the trust remains community property. If there is a provision that states otherwise, this must immediately be brought to the attention of your family law attorney in your divorce matter. Additionally, if you signed any documents with your estate planning attorney changing community property to separate property, or vice-versa, then these documents must be brought to the attention of your family law attorney.
Next, you may want to revoke your revocable living trust during the pendency of your divorce case. The reason you want to do this is to avoid your property passing to your ex-spouse, if at all possible. Please note that revocable living trusts will often require the signatures of both spouses to properly revoke the trust.
In addition to working with a family law attorney, you should speak with an estate planning attorney regarding the best way to proceed with trust revocation. Depending on your circumstances, the estate planning attorney who initially drafted your estate plan may have a conflict of interest in advising you, due to a potential conflict of interest between you and your ex-spouse. You should speak directly with your estate planning attorney to determine whether he or she is still able to represent you as counsel. Further, you should consult your Certified Public Accountant (CPA) to become aware of the tax implications of your divorce. Please note, there may similarly be a conflict of interest with your CPA continuing to work with both you and your ex-spouse. Please consult your CPA directly regarding this potential conflict of interest.
California Family Code section 2040 states in great detail what you can do and what you cannot do once a divorce case is initiated. For purposes of this blog post, we focus on California Family Code section 2040 (b)(1-3), which states as follows:
(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.
Once you decide with all your requisite professionals that it is in your best interest to revoke your revocable living trust, then discuss with your family law attorney whether to file and serve a Notice of Revocation of Trust pursuant to California Family Code section 2040(b)(2). Then, you will be in a position to draft an estate plan—which typically includes a revocable living trust, pourover will, durable power of attorney, advance health care directive, and other miscellaneous documents—with your estate planning attorney.
If you do not have an estate plan, you should consult with an estate planning attorney about the benefits of having an estate plan, which usually includes protecting your assets and loved ones, avoiding probate court, and saving your family money, time and heartache in the event of death or incapacitation.
Finally, make sure to discuss with your family law attorney whether you need to reference any estate plans, or their revocation, in any Judgment, Stipulated Judgment, or Marital Settlement Agreement documents, when your divorce case is finalized.
Although many of the concepts in this article may seem overwhelming, working with the proper professional team should help ensure that you navigate the worlds of family law, estate planning, and tax law with minimal stress and enhanced protection for your family and loved ones.
This blog post was co-authored by Tony J. Tyre, Esq. and Ashley A. Andrews, Esq. The attorneys practice in separate law firms. This blog post is provided for educational purposes only. Providing this blog does not establish an attorney/client relationship. None of the information contained in this blog should be acted upon without first consulting with an attorney. Should you have questions about the content of this blog, please arrange to discuss via a consultation.
Tony J. Tyre is the managing partner of The Law Offices of Tony J. Tyre, Esq., APC with locations in Temple City and Covina. His firm offers experienced, client-oriented representation in the areas of estate planning (living trusts, wills, powers of attorney, health care directives, etc.), estate and trust administration, probate law, conservatorships, and elder law, including long-term care planning through Medi-Cal and Veteran’s pension planning. Tony loves helping his clients properly protect themselves, their families, and their assets, both now and in the future.
Ashley A. Andrews is the owner of Ashley A. Andrews, APC a family law firm serving Los Angeles County. Ashley focuses her family law practice on divorce and paternity cases and enjoys helping great parents, business owners or their spouses, and smart people. Ashley uses her experience coordinating experts in business law, tax, estate planning, as well as a range of attorneys in other legal specialties, as needed, to develop the most effective and efficient path to resolution for her family law clients.