Death During Dissolution
What happens when spouses agree on a divorce settlement, but one of them dies before judgment is entered?
When parties to a dissolution voluntarily enter into a martial settlement agreement, their focus is on dividing community assets in a way both can live with, not on creating a de facto estate plan.
In amicable situations, stipulations may be motivated in part by concern for the former spouse’s continued well-being. Even where one party is being less than charitable, the settlement will reflect goals that are specific to the parties. What happens to those goals if one party dies after the agreement is executed, but before final judgment is entered?
An Unintended Consequence
As an example, husband and wife are in their 50s when they split up. They have paid off their mortgage and the family home has appreciated in value. If wife moves out and husband wishes to remain in the home, he would ordinarily have to pay his wife half the value of the house, possibly by taking out a loan even larger than the original mortgage. Suppose wife has separate property and is willing to relinquish her community interest in the house. Her generosity may be motivated in part by guilt over leaving and in part by wanting to be certain her husband remains financially secure. But if her husband dies at any point between the time the settlement agreement is signed and the entry of a final written judgment on property rights, wife’s intent will be defeated. Instead of benefitting husband, the well intentioned gift of her community interest in the house might become a windfall to her husband’s relatives.
A Contract in Motion May Stay in Motion
It is not safe to assume that an executed marital settlement agreement becomes void or voidable upon the death of a party. While in theory probate court has jurisdiction over community property in the event of death before a judgment is entered, appellate courts have upheld the assertion of a family court’s authority to enter judgment nunc pro tunc once the matter is submitted. In re Marriage of Mallory, 55 Cal. App. 4th 1165 (1997). Similarly, when death occurred after bifurcation and a judgment of dissolution—but before a judgment on property issues—the family court retained jurisdiction and had authority to enter a nunc pro tunc judgment on property that predated the death. Frederick v. Superior Court, 223 Cal. App. 4th 988 (2014).
In practical effect, this means that a marital settlement agreement can be legally backdated by the court so it precedes the date of death. This is in spite of the highly personal nature of marital settlement agreements, and in spite of the fact that one party was not alive to personally receive its benefits or shoulder its burdens.
Of course, clients will understand that once final judgment is entered, any personal benefits and burdens conferred might last only days, weeks or months. But what the practitioner wants to avoid in the above example is having a client learn that her generosity has only enriched her deceased husband’s brother, who detests her, before a final judgment is even entered.
In these situations, counsel must keep in mind the potential consequences of an unexpected death prior to a final judgment of dissolution. For instance, during the pendency of the divorce proceedings, a code section presumes joint tenancy property is community property, and that the death of a spouse following bifurcation may keep the surviving joint tenant from inheriting that property. See Cal. Fam. Code § 2581. In addition, benefit plans may have clauses regarding whether spousal benefits automatically terminate upon dissolution or death. Issues may also arise when life insurance benefits are being looked upon as secondary sources of spousal and/or child support, but have not yet been put in place, or are terminated prematurely.
What to Do
Given the willingness of some family courts to retain jurisdiction and enter judgments affecting property nunc pro tunc after death, the safest courses of action include:
■ Adding language in the settlement agreement making it clear that the parties do not wish the agreement to be enforceable unless both parties survive until entry of final written judgment;
■ Making sure the client acknowledges there is still a risk that a court will disregard that stated intent and turn the settlement agreement into a judgment anyway based on authority such as Frederick v. Superior Court, supra; and
■ Thinking through and addressing all other potential consequences should a death occur before a final judgment.
G. Randy Kasten practiced law in California for over thirty years and is currently an active member of the Washington State Bar. He is the author of Just Trust Me: Finding the Truth in a World of Spin (Quest Books, 2011).