Are you considering filing for divorce or legal separation? If so, you should know that your right to create a complete estate plan with a fully funded living trust may be difficult once you file for legal separation or divorce. Once a Petition for Dissolution or Petition for Separation is filed, you may be bound by what are known as the automatic temporary restraining orders pursuant to the California Family Code 2040 (referred to as ATROs) and that those ATROs have implications that could prevent you from creating or changing your estate plan…other than a Will. California Family Code Section 2040(d)(1) covers non-probate transfers, or any instrument other than a Will that transfers property on death, including: “a revocable trust, pay on death account in a financial institution, Totten trust, transfer on death registration of personal property, or other instrument of a type described in Section 5000 of the Probate Code.” This is a real concern for many facing divorce, because under California law if you die during your divorce or legal separation, your estranged spouse can still inherit from your estate through a provision in your Will or Trust or if you had no estate planning through what is known as intestate succession.
If you are considering divorce or legal separation, you may want to consider a consultation with a qualified estate planning attorney and create or make changes to your estate plan before you file for divorce or legal separation. If you do not, you are not completely without options, but those options will either: 1) require the consent of your estranged spouse or a court order; or 2) limit your ability to create a fully funded estate plan that will avoid probate on your death. Some options that are exceptions to the ATROs restrictions:
- Creating, modifying or revoking a Trust but with notice to and consent of your estranged spouse or a Court order. Again, you should consult a qualified estate planning attorney before attempting to modify any Trust created with another person, but especially if you are under ATROs. The terms of the Trust may require both spouses to make any modifications, if that’s the case an attempt to modify it by one spouse, without the consent or cooperation of the other, may be in violation of the terms of the Trust and result in sanctions, attorney’s fees, and/or costs.
- Creating a new trust, that is NOT funded is permissible during the divorce or separation. However, it cannot be funded until after the divorce or legal separation is finalized or dismissed to avoid violating the ATROs against impermissible transmutations or attempted transmutations of property. If you decide to take this option instead of obtaining the consent of your estranged spouse or a court order to allow you to create a new Trust and fund it, you want to make sure that you create a pour-over Will, leaving all of your assets to your Trust upon your death in order to have your Trust effectively distribute the assets of your estate. While this may be a desirable option to: a) avoid your estranged spouse from receiving anything from your estate if you die during the divorce or separation; and/or b) avoid further confrontation or communication with your estranged spouse to obtain their consent for you to create and fund a new Trust, you should understand that your estate will have to undergo probate if the gross value is in excess of $166,250 at the time of your death.
- Creating or revoking new Powers of Attorney or Advanced Health Care Directives.
- If you hold title to your real property as joint tenants with right of survivorship, you can sever the joint tenancy with notice and filing of the intent to sever the joint tenancy and also record it with the County Recorder’s Office in the County where the property is located. This will allow title to the real property to change to tenants in common, with your 50% passing according to your Will or to your heirs and your estranged spouse’s share passing according to their Will or to their heirs. Of course, because California real property values are so high, this will almost guarantee your share of the property will have to go through probate if you die during the divorce proceeding. It will also prevent you from automatically receiving your spouse’s share on his or her death, so if they are elderly or ill and you want to gamble that they will predecease you prior to the conclusion of your divorce, you may want to maintain the title as joint tenants with right of survivorship. It is a calculated risk, and you should discuss it with a qualified estate planning attorney and your divorce attorney before severing joint tenancy on real property owned with your estranged spouse.
Since each case is different, you should consult with an qualified estate planning and family law attorney PRIOR to doing anything as it relates to your assets or your current estate plan. Since every situation is unique, your attorney may be able to secure a court ordered exception to one or more of the ATROs.
Don’t wait until it’s too late. Contact Cannon Legal Firm today for a free consultation to review your existing estate plan; to create a new one; advise you on administering a trust or estate; or if you are a beneficiary who wants to know your rights. Dana@CannonLegalFirm.com – 562.543.4529 (Voice and Text) – www.CannonLegalFirm.com