We see it often in our practice. A couple prepares their estate plan, including a joint revocable trust. One spouse dies, and eventually the surviving spouse remarries. What is the relationship between remarriage and your trust plan?
Michael Berezo lived in Kirkwood, Missouri. He had married Alene Haskell in 1986; the couple had one adult daughter Alison. Alene, a lawyer with a large multi-state law firm, died in 2012 shortly after her 60th birthday.
Michael and Alene had prepared their estate plan. They had signed a joint revocable trust, leaving everything to one another and, on the second death, to a special needs trust for their daughter. After Alene’s death, Michael modified his trust to note that she had died and to remove her as a beneficiary; the trust still made several references to his “wife”, however.
Two years after Alene’s death, Michael remarried. His second wife, Patricia Cashman, had known and socialized with Alene and Michael. Michael began thinking about making another modification of his trust and estate plan.
Michael’s estate planning attorney (a partner of his late wife’s) prepared a draft of changes they had discussed. A draft trust rewrite (a “restatement” of his and Alene’s joint trust) was sent to him about three months after his remarriage. Tragically (and unexpectedly), Michael died just a few months later, without ever having signed the new trust document.
How does remarriage affect your estate plan?
Patricia and her late husband’s brother met with the attorney who had drafted the trust restatement. They discussed what would happen to Michael’s estate, which totaled about $5 million. Virtually all of it was titled to the trust.
Could Patricia argue that the trust’s references to his “wife” would no apply to her, effectively incorporating her as a trust beneficiary? How about an argument that the unsigned draft reflected Michael’s actual intentions? What about promises Michael had made to her before his death? Would Missouri law allow her to claim a portion of his estate as if she had been omitted from his estate plan?
Eventually the attorney representing both sides of the discussion realized that he could no longer continue. He withdrew from representing Patricia (but continued to represent the trustee). She hired a new attorney, and filed a claim in the Missouri courts, seeking at least half of Michael’s assets.
The trial court denied her various requests. Not only that, the judge ordered her to pay the trust’s legal fees, finding that her legal proceedings were “vexatious.” All she was entitled to, said the judge, was one half of Michael’s probate estate — which was a very small portion of his assets, since nearly all had been titled to his trust.
The Missouri Court of Appeals
Earlier this month, the Missouri Court of Appeals considered the Berezo trust and estate. The appellate judges upheld the trial court’s finding that Patricia would receive nothing from the trust, and that she would have to pay the trust’s attorneys fees. Patricia’s claim against the prior attorney was separated out before the appeal, and was not covered in the court’s decision.
The Court of Appeals ruled that Patricia did not become a beneficiary of the trust merely because it referred to the “Grantor’s wife”, even though those terms remained after the revisions adopted after Alene’s death. Though he had intended to minimize estate taxes by leaving a significant share of his estate to Alene, there was no indication that he had made changes to transfer that benefit to Patricia. Alene’s role in the original trust was not transferable to any new wife Michael might have. Besides, the trust expressly included provisions contemplating the possibility that Alene might die first.
Patricia acknowledged that Michael had not formally signed the draft trust amendment that would have included her. But, she argued, he had sent emails to his lawyer indicating his intentions and his review and editing of the proposed draft. She insisted that was “substantial compliance” with the requirement of execution of a trust amendment.
The appellate court once again agreed with the trial judge. The email exchange did not amount to execution of a trust amendment, said the judges. Besides, the trust itself set out the requirements for an amendment — and the emails did not qualify.
But doesn’t a new wife get a share of her deceased husband’s estate?
Under Missouri law, a spouse unprovided for by a decedent’s will might receive a share of his or her estate. Wouldn’t that argue for inclusion of Patricia as a beneficiary of the trust?
No, ruled the appellate court. Remarriage might affect your will, and it certainly would change how your probate estate was distributed if you had no will at all. But remarriage does not affect your trust, said the Court of Appeals. Furthermore, Patricia had no right to “invade” the trust because of Michael’s omission. Berezo v. Berezo, June 4, 2021.
What would happen in Arizona?
Would Arizona courts reach the same result? How would remarriage affect your trust — and the rest of your estate plan — in Arizona?
Like most states, Arizona effectively modifies a will signed before marriage. Unless, that is, the now-deceased spouse had clear intention to disinherit his or her new spouse. But, as in Missouri, the same principle does not extend to trusts.
Arizona, of course, is a community property state. Wouldn’t Patricia have acquired a community property interest in Michael’s estate immediately on their remarriage?
No. That is one of the most common misunderstandings about community property. Assets one spouse owned before a marriage remain separate property unless and until they do something to turn those assets into community property.
The bottom line: The result for Patricia would have likely been the same under Arizona law. Well, maybe not — establishing that someone is a “vexatious” litigant seems to be a little more difficult under Arizona law. Perhaps she would not have had to pay the trust’s attorneys fees.