Divorce: Estates And Trusts And Proposed New Law

Existing California law (California Probate Code Section 5600) invalidates nonprobate transfers of assets made to a former spouse by a decedent before termination of the marriage, unless

There is clear and convincing evidence that the decedent intended for the benefits to pass even after termination of the marriage,

The nonprobate transfer is not subject to revocation, or

A court orders otherwise.

A bill pending before the California State Legislature (AB 873) would permit a court instead to impose any or all of the following conditions upon a party to a bifurcated, status-only dissolution:

A new condition authorizing the court to make an order, if appropriate and except as specified, requiring that a party maintain a beneficiary designation for a nonprobate transfer asset until judgment has been entered with respect to the community ownership of that asset and until the other party’s interest therein has been distributed to him or her.

A new condition authorizing the court to require that the community interest in an Individual Retirement Account (IRA) by or for the benefit of the party be assigned or transferred, as specified, to the other party to preserve the ability of the party to defer the distribution of the IRA upon the death of the other party. In addition, the bill would include a new condition authorizing the court to order a specific security interest under specified circumstances that may arise upon the death of one party.

Except as specified, the bill would require a party to maintain a beneficiary designation for a spouse for up to half, or upon a showing of good cause all, of a nonprobate transfer asset until a final judgment on the community interest has been entered.

Consult with an estate planning attorney about your alternatives. Call Mitchell A. Port at (310) 559-5259.