Private Client Services Update - Estate Planning During Divorce

Parties going through divorce usually postpone writing a new will until the court has adjudicated their rights and what assets they own. Understandably, the anxiety of trying to anticipate what the future will look like as a single person (financially, socially, and relationally) can be overwhelming. However, estate planning during divorce is critical.The failure to engage in thoughtful estate planning during divorce can add unnecessary complications to an already overwhelming situation.

The importance of estate planning during divorce is exemplified by a recent Virginia Circuit Court decision, in which estate planning became the critical issue. In the matter of Brown v. Brown, CL12-4681, the York County Circuit Courthad before it parties who had a complex set of assets. The husband and wife had lived separately and apart for a sufficient time to be granted a divorce a vincula matrimonii. They asked the court to grant them a divorce and to set a date to hear and rule upon the equitable distribution of their collective assets. Under Virginia Code 20-107.3, Virginia courts are now permitted to bifurcate the ruling on terminating the marriage and withhold a ruling on equitable distribution until a later date. This in fact occurred in Brown, but before the second hearing on equitable distribution, the husband died.

In Brown, the Circuit Court found that the order granting divorce was final. Each of the parties was now single and could change the beneficiaries on their life insurance, retirement plans and other instruments payable on death.[1] The order of divorce revoked any appointment to the former spouse under a will signed prior to the entry of the divorce decree. Further, the Court ruled that its jurisdiction was terminated when the husband died because he was not present as a party.In Virginia, divorce is an action only between the married parties.Consistent with this well-settled law, the Court would not allow substitution of the estate for the husband.

The result in Brown is stark. The husband had re-written his will after the divorce and that will became valid. Since he was a single person at the time of his death, the real property that had once been entitled tenants by the entirety with rights of survivorship as of common law became tenants in common with no right of survivorship. The former spouse had no rights to the whole of the real estate because she was no longer a spouse. However, the debts the two had signed werejoint and severable and each party was liable for the entire debt. The consequences of postponing equitable distribution proved significant to the wife upon the husbands death.

What could the wife have done in this case? When the divorce decree was granted, the parties could have agreed that in the event of death, they would subject their respective estates to equitable distribution on a contractual basis. Alternatively, the parties could have agreed to a split of the assets in the event of death and kept this private until the equitable distribution hearing was completed and the judge had made a ruling. As a third option, the parties could have agreed to grant each other the rights of a surviving spouse under Va. Code Ann. 64.2-309-311 and for a claim of an augmented estate under Va. Code Ann. 64.2-302.

As clearly demonstrated by this recent Virginia case law, preparing and drafting a will during divorce is essential to protecting your intent for the distribution of your assets. If you are going to ask the court for a divorce and postpone equitable distribution, you must understand the ramifications.

If there are issues affecting your divorce that you would like for us to consider, please contact us or ask your divorce attorney to contact us for assistance.

[1] The right to amend beneficiary designations exists unless there is an abatement agreement.

The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2018.

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