Divorce Complications in Estates and Estate Planning: Together With the Unraveling of Common Provisions for the Former Spouse
| Publication year | 2004 |
| Author | By Thomas B. Garrett |
By Thomas B. Garrett*
All too often when a divorce occurs, the terrific, cutting-edge estate planning for the married couple takes on a different complexion. The consideration shifts to unraveling the plan, or separating the interests of the husband and wife.
If the estate planning was straightforward, such as a tax sensitive revocable trust with pour-over wills, undoing the plan may not be difficult. Similarly, when the spouses hold certain assets in joint tenancy, or have designated each other as the beneficiary of insurance, annuities, and retirement plan benefits, the elimination of the former spouse after the dissolution typically is easily accomplished.
Conversely, if there have been various sophisticated estate planning techniques for the husband and wife, challenges and complications can arise in restructuring irrevocable planning or retaining tax qualified status. The planner also can have problems when representing a propertied spouse when removing the former spouse from the planning. For example, if the husband and wife have established charitable trusts providing for both of them, irrevocable insurance trusts holding joint and survivor policies, or qualified personal residence trusts, the issues and concerns become more complex. In a divorce, unfortunately, there is no ideal exit strategy with certain types of irrevocable planning devices.
Without proper attention to the effects of the marital dissolution, adverse tax consequences can result. Can the charitable trusts be divided without jeopardizing their tax-exempt status? What are the options with an irrevocable insurance trust? Can the QPRTs with co-tenancy interests remain qualified despite the divorce?
Issues also arise in connection with whether the probate court or the family law court has jurisdiction to handle the resolution of the various matters presented in the trust and divorce context. These types of marital dissolution and family law issues and complications, which frequently arise in estate administration and estate planning, will be the focus of this article. Guidance will be suggested in handling these matters and dealing with the divorce related issues.
The Probate Code provides that unless the will expressly provides otherwise, the provisions of a will providing for the spouse and any nomination of the spouse as executor, trustee, conservator, or guardian are revoked upon the dissolution of the marriage.1 In light of Probate Code § 6122, one might think that unless there is extrinsic evidence that the testator intended to exclude the former spouse's children when they are named devisees, they would take from the decedent despite the divorce. The Court of Appeal has decided differently, however, holding in two cases that a testator who provides for his former spouse's children is presumed to have intended to exclude them after the dissolution of the marriage unless a contrary intention is indicated elsewhere in the will.
In Estate of Hermon,2 the testator executed a will on March 6, 1974 that provided, "I am married to SUZANNE HERMON and all references in this Will to 'my spouse' are to her...My spouse has four (4) children now living...." The will provided for certain property to pass to the spouse if she survived, and if she did not, to "my children and my spouse's children who survive me...." The residue of the estate passed to the spouse if she survived him for 180 days and, if she did not, to "my issue and my spouse's issue who survive me for that period." The Hermons' marriage dissolved in 1986 and the decedent died in 1993 survived by a child of his own and by all four of the former stepchildren.
The trial court ruled in favor of the former stepchildren. The Court of Appeal reversed, holding that the devises to "my spouse's children" and "my spouse's issue" failed, absent an expression of intent that the devises were to survive the dissolution of the marriage. The court noted that the will lacked any specific provision with respect to marital dissolution, and stated that "there is no reason to believe [the testator] gave any thought to that possibility at the time of execution."3
The decedent's former stepchildren argued that Probate Code § 6122 revoked only those provisions of the will in favor of the former spouse (their mother). They contended that the statute should not be construed as having the effect of nullifying any portion of the will in favor of a former spouse's children. They maintained that if the Legislature desired such an effect, it would have so specified in Probate Code § 6122.
The decedent's natural child argued that Probate Code § 6122 was not the primary issue, that the will was ambiguous "in light of the extrinsic fact of divorce," and that the bequests to "my children," "my issue," "my spouse's children," and "my spouse's issue" were class gifts with class membership being determined at the time of the testator's death. The child maintained that at the time of the testator's death, he was the decedent's sole surviving child and clearly a member of the class, while his stepsiblings no longer were
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within the description of "my spouse's children" or "my spouse's issue." Neither side introduced any extrinsic evidence concerning the meaning of the language used by the testator.
The Court of Appeal stated that:
We find it significant that the testator's former stepchildren are listed by name only in the preamble to the will for identification purposes. In the dispositive portions of the will, the words "my spouse's children" and "my spouse's issue" are used without naming any individuals, signaling the testator's paramount intention to describe the beneficiaries not as individuals, but as members of a group identified by familial ties. Consequently, the matter of relationship at the time of the testator's death should be taken into consideration. There is nothing in this will to indicate that the testator wanted to provide for "my former wife's issue" or "my former wife's children." We think it is a more logical construction to hold that when a testator provides for his spouse's children, he normally intends to exclude children of an ex-spouse after dissolution, unless a contrary intention is indicated elsewhere in his will...We arrive at [this] outcome consistent with the deceased's likely intent giving the language of his will a construction favoring the natural objects of his bounty.4
In Estate of Jones,5 the Court of Appeal also was faced with an absence of extrinsic evidence of intent as to the continued inclusion in a will of a stepdaughter after a marital dissolution. Since there was no evidence of a contrary intent to continue to include the former stepdaughter, the court in Jones felt "constrained to agree with Estate of Hermon [cite] that 'when a testator provides for his spouse's children (as a class), he normally intends to exclude children of an ex-spouse after dissolution, unless a contrary intention is indicated elsewhere in his will.'"
Mr. Jones executed a will in 1988, during his marriage, that stated: "...all the rest, residue, and remainder of my property, real, personal, and mixed, at whatever time acquired by me and wherever situated, I give, devise, and bequeath (in equal shares) to the following beneficiary or beneficiaries who survive me: my stepdaughters Paula Labo and [appellant] Kathy Hardie." In 1994, Mr. Jones and his wife divorced and in 2002 Mr. Jones died.
In ruling against the stepdaughters, the trial court had observed that, while Probate Code § 6122 is clear regarding revocation of dispositions to former spouses, the law regarding dispositions to the issue of a former spouse is less than clear. The trial court found that the intent of the testator was that his initial residual bequest to appellant was to her as a member of a class, and that upon the divorce, appellant was no longer a member of that class.
The Court of Appeal relied on the fact that "at the time the testator died, appellant was no longer a stepdaughter, because that relationship had ended with appellant's mother's divorce from the testator [and thus]... a literal reading of the will excludes appellant from taking," and also relied on Hermon which held that "'when a testator provides for his spouse's children, he normally intends to exclude children of an ex-spouse after dissolution, unless a contrary intention is indicated elsewhere in his will.'" The court was unpersuaded with appellant's argument that Hermon could be distinguished because Mr. Jones did name her by name ("my stepdaughters Paula Labo and Kathy Hardie"). The court stated that:
Moreover, we are not persuaded by appellant's presumption that use of her name in the will displayed an intent to provide for her after divorce. It seems more likely the testator was not contemplating divorce when he prepared his last will and testament six years before the divorce. Appellant was already an adult when her mother married Jones, and so there is no issue of the bond associated with raising a child. The marital settlement agreement made apparent a desire for a clean break between the parties and expressly stated husband and wife agreed to relinquish any future claims against the estate of the other (except as provided in a will or codicil dated after the date of the marital settlement agreement), and the marital settlement agreement was binding on the parties and their heirs and successors. The general preference for upholding testamentary transfers does not speak to the circumstances of this case.6
The only extrinsic evidence of the testator's intent was the marital settlement agreement, which, as the court noted, did not support appellant's arguments. If appellant had a continuing...
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