New Probate Code Affects Estate Planning At Divorce

When a divorce petition is filed, the spouses generally may not transfer or dispose of property without the other spouse's consent or a court order. Still, the wise lawyer will counsel clients to plan their estates ­ including preparing new wills and power of attorney, and changing beneficiaries on all transfer instruments ­ in anticipation of the divorce judgment.

By Barbara S. Hughes

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As divorce settlement or trial approaches, estate planning may be the farthest thing from the divorcing client's mind. Does the divorce attorney have an obligation to see that the client prepares and executes a new will? Does the attorney have any further obligations? What if the client is balking at additional "unnecessary" fees?

This article discusses estate planning that the divorce attorney should cover with the client during the pendency and, in particular, at the time of the final divorce hearing. It also summarizes current law concerning the effects of the divorce judgment on existing estate planning instruments, including the impact of the new probate code which became effective Jan. 1, 1999. ¹

Clients can reasonably expect that divorce-related legal advice should encompass, at a minimum, basic estate replanning for the changed family situation and the client's financial condition. In today's litigious cultural setting, the wise course is to make sure the client executes a new will and powers of attorney, and understands exactly how to name beneficiaries on nontestamentary instruments of transfer. If the attorney lacks recent estate planning experience, he or she should work with competent cocounsel to see that estate planning documents are ready for the client to execute at the time of divorce.

It is important that the client realize the cost of an attorney preparing a new will and assisting the client to set up valid dispositive directions for nontestamentary transfers is minimal compared to the amount of time and the cost required to negotiate and draft a final stipulation or to take a case to trial.

Estate planning as part of the divorce process

One way to ensure that the client views estate planning as a necessary part of the divorce process is to plan and draft a will during the pendency, or even prior to filing the petition. During the pendency there are some limitations on what can be accomplished. The spousal elective and marital property and rights to a selection of personalty continue until the judgment is granted. The surviving spouse cannot elect specifically bequeathed items of personalty unless the items are normal household furnishings, furniture, and appliances necessary to maintain the home.²

Upon filing of the divorce petition, section 767.087(1)(b) of the Wisconsin Statutes restricts the transfer or disposition of property without consent of the other spouse or a court order, "except in the usual course of business, in order to secure necessities or in order to pay reasonable costs and expenses of the action, including attorney fees." Some attorneys would argue that this statute prevents changing beneficiary designations after filing. Even if this is not the case, temporary orders routinely contain prohibitions against changing life insurance and other beneficiary designations. Nonetheless, if a spouse dies during the pendency, the divorce action abates, leaving the divorce court without jurisdiction to address violation of a temporary order.³ Chapter 766, relevant portions of the recently revised probate code, and the dispositive documents will govern disposition of assets. While a surviving spouse might bring an action requesting imposition of a constructive trust upon assets transferred in violation of a temporary order, the success of such an action is uncertain.

The cost of preparing two wills may weigh against clients having a pendency document. Clients should be informed that they generally have the right to direct the disposition of their gifted and inherited assets, as well as their one-half interest in marital property that is titled or held solely in their names. If the client finds it important enough that the spouse not receive any more than the spouse is legally entitled to have, the expense of a prefiling or pendency will can be justified. Moreover, the additional cost of revising the will after the judgment may be quite modest.

If a will is executed during the pendency or prior to filing the divorce, the will should be reviewed at the time of the final hearing for necessary changes and re-executed promptly after the hearing. As the divorce process continues, clients may have changed their views about an appropriate disposition scheme and the individuals who would be the most effective personal representative, trustee, and guardian. Furthermore, the pool of property controlled by the client's estate planning documents will almost always be different once the divorce is over. Estate planning documents must conform to any requirement of the judgment, especially any requirements for life insurance and/or retirement plan or account beneficiary designations.

New probate code effects on estate planning

What effects does the divorce judgment have upon the client's existing estate planning documents and beneficiary designations under current law, particularly as affected by the new probate code and related provisions?

1) The judgment revokes will and revocable trust provisions, and any dispositions created by law, to the former spouse and to relatives of the former spouse.⁴ Previously, the judgment affected neither the dispositive provisions of revocable trusts nor will provisions benefitting the relatives of a former spouse.

2) Likewise, the judgment now revokes any revocable provisions made by the client in a "governing instrument"⁵ granting a power of appointment to the former spouse or relative of the former spouse.⁶

3) Further, the judgment now revokes beneficiary designations naming the former spouse and relatives of the former spouse.⁷

4) In addition, the judgment severs the interests of the client and former spouse in property held by them as joint tenants with right of survivorship or as survivorship marital property and transforms these interests into tenancies in common.⁸

5) If the client and former spouse's marital property agreement contains a "Washington Will" provision⁹ or other agreement to make a particular disposition in a will or other governing instrument, generally this too is revoked by the judgment.¹⁰

6) If the client's existing estate planning documents have nominated the former spouse or relative as trustee or personal representative, the judgment now revokes these nominations.¹¹

Section 854.15(5) provides for exceptions in which the section 854.15 revocations will be inapplicable. These exceptions are: if the express terms of a governing instrument or court order provide otherwise; if the express terms of a contract relating to the division of the client's and former spouse's property made by them before or after the marriage or the divorce, annulment, or similar event provide otherwise; if the divorce, annulment, or similar event is nullified; if the client and former spouse remarry each other; or if there is a finding of the decedent's contrary intent, which may be construed using extrinsic evidence.

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