Until Death Do Us Part: Planning an Estate for Death Before a Divorce is Finalized
Family turmoil related to divorce, death, and family histories is well known and universally dreaded. However, reality requires working through family dynamics and tension to prepare an estate plan. But what if someone dies while divorce proceedings are pending? More often than you may know, spouses sometimes die before a divorce is finalized, complicating the property issues and potentially upsetting estate plans.
Some preventative measures can help avoid problems when the deceased did not complete divorce proceedings. Ideally, when a client contemplates divorce, a new estate plan is prepared before filing for divorce. Thus, if the client dies before the divorce is finalized; the client’s estate may be administered more closely to the client’s intent when contemplating divorce. Perhaps the concept can be understood as “divorce planning" (plans in case of divorce) in conjunction with “estate planning (plans in case of death).
What happens when a spouse dies before completely divorcing? Mere filing for divorce does not mean that the marriage is over. For example, in California, the law provides for a six-month cooling off period before the marriage is ended. It ain’t over until it’s over. However, the family law case is indeed over. The surviving spouse is a widow, not a divorced ex-spouse. Emotions and drama during divorce run high. In that environment, it is not rare for the surviving spouse to have a bad or non-existent relationship with the deceased’s children. In such a situation, other family members often seek custody of the deceased’s children. Failure to prepare the estate plan (or update the estate plan) to account for the possibility of death before divorce can leave the custodial and property issues unclear and in need of unnecessary litigation to sort out the matters. Many states require a marital share for a surviving spouse. A pre-nuptial agreement could serve to waive that right to protect children’s estate rights.
One thing that does not change upon death is the obligation to pay spousal or child support. Death does not terminate these obligations and the estate is required to pay court-ordered support. A client should be questioned regarding any outstanding support obligations to a previous spouse or children . The estate planning attorney will need to confirm that the terms of the support obligation agreements are met, such as creating and funding trusts, designating beneficiaries, obtaining required insurance, and making any other required provisions for previous spouses and children. Neglecting these issues can invite family discord and litigation after the client’s death.
The prudent action to prevent a big hit on the estate’s assets is to provide a life insurance component to the estate plan to provide for remaining support obligations. The remaining expected support payments can be calculated and an appropriate life insurance benefit can be set up to cover the cumulative amount of payments, such as for the number of months until children reach the age of majority (often 18).
Upon filing for divorce, most states provide for an automatic restraining order prohibiting changing trusts and making amending a will rather difficult. For this reason, when a client seeks advice from a lawyer regarding a contemplated divorce, that lawyer should advise the client to prepare an estate plan first, before filing for divorce. It behooves an estate planning attorney to inform family law attorneys of this issue. Having the family law attorney recommend updating their estate plan before filing divorce helps to generate work for the estate planning attorney. Also, it serves the client well to avoid serious consequences should death occur before the marriage is ended through divorce.
The estate planning attorney should attend to revoking trusts before the client files for divorce. Another helpful task would be to sever joint tenancy title to remove survivorship to avoid problems if death occurs before divorce. One often neglected issue is removing the future ex-spouse from retirement accounts. The client may need to terminate a will, power of attorney, and trusts from a prior marriage. Still, not all provisions of a new will or power of attorney hold up after a second marriage, so the client should re-sign these documents after the second marriage. Then, a new will, trusts, and powers of attorney should be executed for the second marriage.
Care should be taken should the client wish to transfer separate property to a spouse (either as community property or as the recipient’s separate property). If death occurs before the divorce is finalized, most states maintain a presumption that the transferor spouse was under undue influence by the receiving spouse. The intent to transfer or “transmute" property can be a contentious issue for the estate. The client should also be advised not to sign any deeds changing the character of property without the advice of an attorney as such changes usually have disastrous consequences.
Estate planning can present numerous choices and pitfalls for the wary. Normally, clients can be reluctant to face their own mortality and make appropriate plans for their property and their family’s needs. Estate planning requires a great deal of careful attention to details. Even more attention should be directed to account for the possibility of death before divorce.