14 May 2012

Preparing Your Estate Plan for Divorce

Approximately fifty percent of marriages end in divorce. A person contemplating divorce should review his or her assets and joint estate planning documents with his or her estate planning attorney to determine what may be done to legally  protect the assets and “untangle” the joint plan. The goal for the person contemplating divorce is to take actions that will prevent his or her soon to be ex-spouse (and ex-spouse’s beneficiaries) from inheriting his or her assets should he or she die before the divorce process is complete. Under California law, those actions are restricted because a married couple has a fiduciary duty to act with the highest good faith and fair dealing towards one another and neither may take unfair advantage of the other. Also, once a divorce petition is filed and served, automatic temporary restraining orders (known as ATROs) are imposed under California law to maintain the status quo in order to prevent a divorcing spouse from unfairly transferring assets away from the other spouse.

What actions can you legally take to protect your estate plan if you are contemplating divorce or are in the divorce process?

1.         Revoke your joint revocable living trust with prior notice given to your soon to be ex-spouse.

2.         Prepare a new revocable living trust. But, the law prevents you from transferring your assets to this new trust until the divorce is final or unless this action is authorized by the family law court. However, a contingent assignment of assets may be signed directing that assets will be assigned to the revocable living trust as soon as the temporary automatic restraining orders have been removed by the family law court.

3.         Revoke your Will and prepare a new Will.

4.         Sever all joint tenancy with right of survivorship or community property with right of survivorship assets so that the property does not pass to one spouse automatically upon the death of the other. Notice must first be given to the other spouse before the right of survivorship may be severed.

5.         Disclaim an interest in a decedent’s estate.

What can’t you do during the divorce proceeding:

1.         Remove a child of the marriage from the jurisdiction without prior written consent of the other spouse;

2.         Surrender, borrow against or cancel insurance coverage that protects members of the family who are beneficiaries of such policies when the divorce is filed;

3.         Create or modify a non-probate transfer (e.g., insurance, retirement plans, pay on death accounts, etc.) in a manner that affects the disposition of that property without prior written consent of the other spouse or order of the court; and

4.         Transfer, sell or borrow against property that is considered part of the marital estate without prior written consent of the other party or order of the court.

Although limited actions are allowed to be taken with respect to the estate planning documents and assets prior to and during the divorce process, it is important to take the legally permissible actions to insure that your estate planning goals are achieved if you should die before the divorce is final.

If you would like to discuss this or other trusts and estates issues, please contact the attorneys at Drucker Law Offices, 468 North Camden Drive, 2nd Floor, Beverly Hills, CA 90210, 310.285.5375 Tel, 310.444.9754 Fax, www.druckerlaw.com

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