California is a “community property” state. This means any property acquired during a marriage belongs to the spouses equally. In the event of divorce, any community property must be divided between the spouses. Of course, a divorced couple can still own property together, but they would do so as joint tenants or tenants in common; there is no “community property” once the marriage is dissolved.
If you are recently divorced (or contemplating divorce), you should be aware of the estate planning implications. It is important to revise your will or living trust to reflect the end of your marriage. In the event your divorce settlement leaves any unresolved questions over the ownership of former community property, your estate plan should address these issues.
Schmidt v. Turner
Here is a recent example of what may go wrong when community property is not properly dealt with in post-divorce estate planning. This case is discussed simply as an illustration; it is not legal advice nor should it be construed as a definitive statement of the law. Although this case was recently decided by a California appeals court, it deals with property initially received by a couple that divorced nearly 50 years ago.
At the time, the couple lived in New Mexico, which, like California, is a community property state. They received a gift of California real property in 1965 under a deed that identified them as “joint tenants.” A joint tenancy exists when two or more people own an undivided interest in the whole property. This means that when one joint tenant dies, his or her interest is automatically transferred to the surviving tenants. This is often known as a “joint tenancy with right of survivorship.”
The couple divorced in 1967, two years after receiving the California property. Under their divorce settlement, the husband paid the wife a lump sum in exchange for her one-half interest in the couple’s community property. The settlement made no disposition of the California property. In 1972, however, the ex-husband signed a handwritten note purporting to give his ex-wife his interest in the California property.
The ex-husband died in 2006. His ex-wife died in 2011. Following her death, the respective heirs of both estates went to court to determine the ownership of the California property. The ex-husband’s heirs argued it was community property, which belonged solely to the ex-husband under the terms of the 1967 divorce settlement. The ex-wife’s heirs disagreed. They claimed the California land was always a joint tenancy. Both a trial court, and later the California Court of Appeal, agreed with the ex-wife’s heirs. The land was held separately between each ex-spouse as joint tenants, and since the ex-husband died first, the ex-wife became sole owner upon his death. That meant that upon her death, the property passed solely to her heirs. (While neither court passed judgment on the validity of the ex-husband’s 1972 note, the Court of Appeal suggested it proved the couple understood the property to be a joint tenancy all along.)
Don’t Wait to Change Your Will
You shouldn’t wait nearly half a century to settle any outstanding property issues from your divorce. It is certainly a waste of time and money for your heirs to argue over something that can and should be addressed through proper estate planning. If you are looking to amend your will or trust following a divorce, contact the Law Office of Scott C. Soady today for more information.