Marriage is a life-changing event. When two people commit to share their lives together in a legal ceremony, even the legal system pays attention.
This kind of commitment changes more than just two peoples’ living situation. It means sharing property and ownership rights, legal status, inheritance expectations, even tax treatment.
Many who have existing estate plans before getting married may often forget or neglect to update their estate plan at this time. Flush from the excitement of the wedding celebration, maybe a honeymoon, and certainly the complete change of sharing a home with another person, updating wills or beneficiary designations may be the furthest from a person’s mind.
Sooner or later though, existing estate plans must be updated, or new estate plans must be made if one has not done so before.
California is a community property state. This could result in a lot of changes to a person’s assumptions regarding their properties after they get married. And this is certainly not something that should be left to “legal defaults” – not if you want to be deliberate and intentional when it comes to your estate plan.
If you have ever wondered what an estate planning lawyer does, the celebration of a marriage is an opportune time to find out. They can help you understand the legal, fiscal, property, and even tax implications to this kind of change in legal status, and help you formulate a revised strategy to your estate plan.
Marriage Changes Asset Characterization
As a community property states, some of the general rules regarding property ownership in California include the following:
- Assets acquired during the marriage are presumed to belong equally to both spouses
- Property owned before the marriage, or property acquired during marriage by gift or inheritance, are considered separate property
But these are general rules for a reason. Life so rarely falls under clean categories.
For instance:
- What if a gift was given to both spouses?
- What if separate property was sold and the funds used to purchase new property during the marriage?
- What if community property funds were used to pay the mortgage on a separate property?
- What if a person has been married previously and the community funds from the first marriage were used to pay for property in the second marriage?
One of the important tasks for an estate planning lawyer is asset characterization. Based on the legal rules regarding property ownership and family law, your lawyer can help determine if property is separate, community property, or jointly owned.
This is important because asset characterization is one of the core basis for a person’s estate plan.
You first have to know to whom property belongs, how it is treated under the law, before you can decide how it should be treated in your estate plan.
This is important because asset characterization can also impact inheritance rights, taxation, and ownership interests and rights.
Careful planning at this point, and a clear basis for how property is characterized, can also serve to prevent or avoid future litigation between the spouses, any children from a previous marriage, or other beneficiaries who may later challenge property ownership.
Changing Asset Characterization Using Transmutation Agreements
One demonstration of how a person can use strategic estate planning is by using a transmutation agreement.
This is encapsulated under Family Code §850 which allows spouses to change the character of a property. Community property can become separate property, and vice versa. The separate property of one spouse can also be transmuted into the separate property of the other spouse.
This means that a couple need not rely entirely on the default characterization of property that is assigned to it by law. Careful estate planning by a married couple allows them to determine, by mutual consent, and with the use of a valid transmutation agreement, the character of their property and even the ownership of separate property.
The requirements for such an agreement are quite strict, and the written agreement containing such transmutation must be carefully worded.
So the services of an estate planning lawyer is crucial here. First, a good lawyer will be able to give you good advice regarding the advisability of making such a transmutation in the first place (Should you or shouldn’t you?) and then prepare the appropriate instrument that would accurately reflect the married couple’s intentions and ensure that it passes legal muster.
Protection for the Omitted Spouse
The reality that many people forget or neglect to update their will or other estate plan after marriage is reflected in the fact that even the law accounts for this by providing a statutory share to the spouse in case they are left out of or omitted in a will.
Under California Probate Code §21610, a spouse to a marriage that was celebrated after the execution of the instruments of a person’s estate plan, and that was not updated, is nevertheless entitled to a share in the decedent’s estate, including:
- One-half of the community property that belongs to the decedent;
- One-half of the quasi-community property that belongs to the decedent; and
- A share in the value of the separate property of the decedent which in no case shall exceed one-half of its value
Of course, the better option is to be intentional with respect to one’s property and the extent to which your surviving family members will inherit, whether your surviving spouse, children, or other family members.
Otherwise, you face the risk of the unintended consequences of an outdated estate plan and the legal provisions and default legal rules that seek to remedy this scenario.
Blended Families
Perhaps one of the best reasons to ensure that your estate plan is updated is all the confusion that may arise from a blended family.
A person who has remarried after being divorced one or more times before will have a rather complicated situation – particularly if there were children in those different marriages.
More importantly, a blended family situation and an outdated estate plan might lead to claims and counterclaims from all who feel that the division of an estate is not fair.
Given, fairness may be hard to quantify, particularly in a blended family with complex dynamics.
But the beauty of an estate plan is that you can map all this out in advance, including what each family member gets, and the reason why. These intentions, especially if explained in a way that would satisfy all the heirs and successors, could go a long way to avoiding drawn out and costly litigation later on.
In a blended family, an estate planning lawyer can help design a plan that provides for a surviving spouse without unintentionally disinheriting children from a prior marriage. For example, instead of leaving all assets outright to a new spouse, a lawyer may recommend the use of a trust that allows the surviving spouse to receive income or support during their lifetime while preserving the principal for eventual distribution to the children. This allows a person to fulfill obligations to their current spouse while ensuring that family assets ultimately pass according to their wishes.
Conclusion
Marriage is life-changing in more ways than one. A good estate planning lawyer would recommend that you update your estate plan with any major life changes, most especially after the celebration of marriage.
Whether you are entering a first marriage, building a blended family, protecting separate property, or planning for future generations, proactive planning can help ensure your estate reflects your actual wishes. An estate planning lawyer can help clarify the implications of this life-change on your estate plan, and help align your existing plan to your changed legal status.