Death and Divorce
People die during divorces. People die after divorces. Sometimes it takes litigation to untangle the knots. Complications occur when a testator does not update or modify their estate plans and beneficiary designations.
When dividing assets in divorce there could arise tension between family court and probate court in California. The two court systems can differ substantively in how they answer important questions such as:
§ When a spouse dies before a couple’s divorce is final, how is joint tenancy of real or personal property allocated?
§ What are the reimbursement rights of a spouse who contributed separate property to acquire joint property during the marriage?
§ How are pensions, profit share, or retirement plans distributed to either the surviving spouse or the heirs of the deceased spouse?
§ What happens in blended families when the spouse has remarried but intended for the heirs with another spouse to inherit the estate?
At one time, these two courts were aligned, as community property laws were consistently applied in both the family court and probate court. Since precedent is overarching, these courts would refer to one another to resolve cases. However, the California legislature, Congress, and our nation’s highest courts’ changes and decision through the years resulted in a divergence of results depending on whether a family court or probate court will decide the issues.
It is imperative for family court litigation attorneys to know the key differences between how family court and probate court will decide and develop litigation strategy that will optimize the return for the client.
Similarly, estate planners need to be vigilant and include necessary backstops in trusts and will as well as continuously and vigilantly monitoring their clients’ paths in life in order to make the appropriate adjustments to help avoid litigation and unwanted results.
The concept of “revocation upon divorce” automatically removes a former spouse as a beneficiary of a will, trust, or other estate document when a divorce is final. If one party dies and there is still joint tenancy, but the divorce settlement agreement assigns property to the now-deceased ex-spouse, then the surviving ex-spouse will need to go to probate court to argue for the property.
In February, 2024 the state Supreme Court in Haggerty v. Thornton (2024) 15 Cal.5thh 729 held that the statutory method of revocation is available as a method of trust modification, unless this method is expressly limited by the trust. The trust reserves the right for the settlor to revoke or amend the trust via the trust instrument. When the trust is silent on the modification method, the statutory method is available unless the trust explicitly provides otherwise. Both methods are available when the trust specifies a method of modification, unless a specified method is expressly excluded.
With this judgment, it is important that ex-spouses, when modifying an estate, understand the ramifications of choosing, not choosing, or making exclusive or precluding a method of revocation.
If someone names their spouse as beneficiary on their life insurance policy or retirement plan, and they subsequently divorce, the ex-spouse will no longer be eligible to inherit the assets unless the testator specifically designates the ex-spouse as beneficiary after the divorce (or in the marital settlement agreement).
The purpose of revocation upon divorce is to prevent unintended consequences and ensure that the assets are distributed according to the ex-spouse’s wishes after a breakup.
Certain laws in California, California Probate Code Section 5302 and Code Section 5604 govern revocable transfer on death deeds and rights of surviving tenants. Beneficiary designations on life insurance policies and retirement accounts do not conform to revocable transfer on death deeds, but rather take precedence.
Even a term life insurance policy which has no cash value has value for a surviving ex-spouse if the premiums were paid for with community property. Even if a judgment of dissolution was entered before the insured’s death and the insured had already changed the beneficiary, a surviving former spouse may have a claim to proceeds of a renewed term life insurance policy if the insured former spouse was uninsurable after the term expired.
In determining who inherits joint tenancy property in the case of divorce it comes down to whether the decision falls to probate court or family court. Joint tenancy property typically carries a right of survivorship, meaning the surviving joint tenant inherits the property upon the death of the other.
In California, this right can be affect by family court proceedings. If a divorce petition has been filed and served but not yet finalized, the surviving spouse will inherit the property, even if the decedent’s will specifies otherwise. To prevent this, a person can sever the joint tenancy before final judgment by following specific legal procedures outlined in Family Code 2040(b)(3) and Civil Code 683.2. The rules of survivorship also apply to personal property such as cars and bank accounts held in joint tenancy.
Because of joint tenancy precedence, allowing assets to remain in joint tenancy during divorce proceedings runs the risk that the surviving spouse will inherit them. Notice of severance should be given before a divorce is final.
Before entering into a dissolution process, ensure that state plans are updated and modified appropriately because once the petition for dissolution is filed, Automatic Temporary Restraining Orders prohibit changes to wills and trusts. Ensure that the family law attorney is cognizant of the differences in the ways California family court and probate court will interpret and decide key issues should one of the parties die during the divorce and afterwards by planning and advising accordingly.
This article does NOT constitute legal advice and is for general information purposes ONLY. Prior to making any decisions, seek legal counsel from a licensed attorney.
