Divorce practice requires an attorney to become a jack-of-all-trades
MICHAEL C. CRAVEN
Law Bulletin columnist
Published: April 19, 2017
Welcome to my new column, Discourse on Divorce. As a family law attorney, my practice has always intersected with many other fields of law. Knowing the value of collaboration in my work, it occurred to me that with decades of experience practicing as a divorce and family law attorney, I might have something of value to offer my colleagues.
My goal for this column is to help provide nondivorce lawyers with insights from a divorce attorney and shed some light to other divorce attorneys about the nuances of other legal fields that are woven into the fabric of a divorce case.
Family law attorneys and estate planning lawyers have a lot in common. I realized this early in my career when working in the estate planning field. We both work on behalf of families to protect futures and provide security when our clients are most vulnerable.
I’ve continued to be interested in this aspect of the law and I’ve always found it especially relevant to the practice of family law. I consider estate planning an essential step in any divorce, something to be aware of both pre- and post-decree and ultimately to assure an estate plan is in compliance with the terms of a client’s divorce.
Divorce leaves an indelible imprint on the financial stability of the family as it seeks to split assets once considered part of a joint venture into a pool that must be divided equitably. Divorce agreements address among other things the disposition of property, the imposition of obligations to maintain life insurance and the securing of certain financial obligations.
Divorce agreements often affect the parties’ estate planning documents such as wills, trusts and powers of attorney. This impacts documents that often lie out of our client’s minds and buried in safety deposit box, lawyer’s office or basement file cabinets.
Once an attorney ascertains that a client is divorced or in the process of a divorce, prudent estate planners review premarital agreements, the marital settlement agreement (or proposed marital settlement agreement) or judgment and relevant post-decree documents.
As I step into the shoes of estate planners, Atticus Finch-style, I have created a checklist of the issues pertinent to marital dissolution, the estate planning documents that may be impacted by them and practice tips to facilitate client conversations and optimize solutions on their behalf.
I cannot stress enough the identification, review and updating of all relevant documents.
Life insurance. A former spouse who is the designated beneficiary of an insurance policy is not barred from collecting the insurance proceeds upon the death of the insured ex-spouse simply because they have divorced.
Virtually every settlement agreement contains a general release stating the ex-spouse waives any interest in all properties of the other but this is not enough to protect the client who forgot to remove his or her ex-spouse as the beneficiary of the policy and to designate another, such as a new spouse. For a release to be effective for life insurance, the release must be specific, straightforward and expressly reference life insurance.
Where there is spousal support, for minor or college age children, many settlement agreements require one or both parties to maintain life insurance for the benefit of the recipient of support or the minors. In these cases, where one spouse fails to change the beneficiary designation, a battle over the insurance proceeds may include the ex, the children and a new spouse.
Further, settlement agreements often provide for the ex-spouse or the children to be the policy’s beneficiary. It can be helpful for estate planning attorneys to work with the divorce attorney before the settlement agreement is finalized to insure that life insurance beneficiary designations are handled optimally. Many settlement agreements may be improved if a written trust agreement is prepared with the trustee being the beneficiary of the life insurance.
The general rule that an ex-spouse’s designation as a beneficiary of a life insurance policy is not modified due to divorce may be subject to an equitable claim. Where a divorce judgment requires an insured to maintain life insurance for the benefit of a particular beneficiary, that beneficiary has an enforceable equitable right to the proceeds of the insurance policy against any other named beneficiary, except someone with a superior equitable right.
In such cases, the ancient maxim followed by courts of chancery that “equity regards as done that which ought to be done” is followed.
Wills. Marriage does not modify the terms of a will. However, divorce and annulment, but not separation, revise the terms of a will by operation of law, including legacies, power of appointment and fiduciary nominations. A former spouse is treated as if he or she died before the testator. The testator must take the proactive step of reaffirmation to make an ex-spouse a beneficiary after a divorce.
Trusts. Divorce and annulment, not separation, revise the terms of a revocable trust by operation of law. The trust can override the statute that mandates revision. The impact of the dissolution on an irrevocable trust can be found in the trust document, as the law does not provide for automatic revisions due to divorce.
Estate planning lawyers should instruct their clients contemplating or in a divorce case to make their divorce attorneys aware of irrevocable trusts. Divorce attorneys must be sure that they understand the trust and to consider whether revisions to the trust should be incorporated into the divorce negotiations.
Powers of Attorney. Spouses may have executed powers of attorney for decisions regarding property, finances, personal and/or health care. Under Illinois law, the agent who becomes a former spouse is deemed to have died upon dissolution. This rule is applicable to divorce or legal separation but does not apply to annulments.
Unlike wills and trusts, changes to powers of attorney should be addressed at the outset of the divorce proceedings. Waiting until the end of a case may be a poor choice; does a client want his or her estranged spouse making life ending decisions while the case is pending?
Clients need counsel’s assistance in thinking through the selection of the appropriate agent and any successors to carry out their wishes in light of their newly single status.
An estate planners’ checklist should include review of all documents related to the above to ensure, (1) all executors, trustees and beneficiaries are named consistent with the settlement agreement, judgment and any post-decree modifications, (2) no reaffirmation of a will is necessary, (3) the divorce, legal separation or annulment judgment does not require a result that contravenes the law, and (4) whether the creation of a trust to be the designated beneficiary of life insurance is appropriate.
Collaboration with the parties’ divorce attorneys to consider the necessary modifications is essential.
Divorce requires attorneys to factor in unique family dynamics that could pit children against new spouses and divide loyalties in the most stressful of times.
Divorce lawyers are keenly aware we are in partnership with estate planning attorneys and our clients to secure their family’s future — every person’s most precious asset by any measure.
Michael C. Craven, J.D., L.L.M. and C.P.A. is a partner at Harrison & Held, LLP. His practice focuses on complex divorce and family law litigation, mediation and collaborative law cases. He can be reached at email@example.com.