What Do Estate Planners And Dissolution Attorneys Have In Common

The short answer is ‘more than you may think‣. Consider the case of In Re Marriage of Holtemann. In this divorce case, Husband and Wife were married in 2003 and separated a short three years later. Husband had a number of assets while Wife did not have many. As many estate planners know that with considerable assets, spouses must regard considerable taxes upon death if the spouses fail to make the appropriate estate-planning decisions. These parties did just that and sought the appropriate guidance. The parties prepared a Living Trust and a Spousal Property Transmutation Agreement so as to minimize their estate tax. What this Spousal Property Transmutation document set forth was that all of Husband‣s considerable separate property was transmuted to community property. Without getting into too much legal-speak, in a divorce action, when a spouse comes into a marriage with assets he/she had prior to the marriage, and does nothing to affect the title of those assets, they will remain his/her separate property upon divorce. Things purchased during the marriage will be presumed community property or owned by both spouses. Back to the Holtemann case. These parties, again to limit estate taxes, indicated in this document that all of Husband‣s separate property was changed (the official word is “transmuted”) to community property.

In 2006, Wife files for divorce. After separation, realizing that in the Trust he changed all his separate property from his sole ownership to jointly with his Wife, now states that the Trust is revoked in an effort to cancel the transmutation. At their divorce trial, Wife, of course, uses the Trust to show all the property is owned 50-50 and she should be awarded her one-half. The trial court agreed with Wife and awarded her one-half of the property. Of course, Husband appealed that decision. The Court of Appeal upheld the trial court‣s ruling and Wife was entitled to one-half of the property. The Appeals Court looked to whether or not there was a change or transmutation of the property from separate to community and not why the parties were interested in making the change, i.e., to save on estate taxes. The Court of Appeals stated that the evidence at the trial level was clear that Husband was fully aware of what he was doing with the property and the language used in the Separate Property Transmutation Agreement was sufficient and did change the property from separate to community, regardless of the “why” he made the change. Therefore, as the reader can see, estate planners and dissolution attorneys have more in common than one might think.