MARCH 2, 1998 VOLUME 5, NUMBER 35
Jess and Sharon Groesbeck were married in 1959, and raised five children in Utah. Like many couples who have been persuaded of the value of living trusts in the past few decades, they chose to use the popular estate planning device to avoid probate and simplify their estate planning. They executed identical living trusts in 1988, each naming the other as the primary beneficiary of their respective estate plans.
A year later, the Groesbecks separated. Sharon Groesbeck filed a divorce proceeding, but did not pursue the divorce. The couple did agree to divide their property, but specifically agreed that their existing estate plans (the two trusts) would remain in effect. The divorce proceeding was then dismissed.
The Groesbecks never lived together again. Sharon Groesbeck died suddenly in 1991 of a stroke.
Jess Groesbeck sought and obtained appointment in the Utah courts as his wife's personal representative. The court accepted her will into probate. Like most people who establish living trusts, she had signed a "pourover" will leaving her entire estate to the trust. The Groesbeck children did not object to the admission of the will to probate.
When it came time to settle the estate and distribute the assets according to the terms of the trust, Jess Groesbeck asked for the court's approval for the distribution. The children objected, arguing that Mr. and Mrs. Groesbeck had entered into a full settlement of all their property interests, and that Jess Groesbeck could not receive the benefit of his wife's property after her death.
After a hearing, the trial court ruled that Sharon Groesbeck's trust was "illusory" because it did not impose any duties on Mrs. Groesbeck during her life. In other words, the court decided that nearly all revocable living trusts in Utah were invalid.
On appeal, the Utah Supreme Court disagreed with both the trial judge and the Groesbeck children. The higher court found that there is nothing illusory about trust duties, and that the Groesbecks had not completely settled all their property disputes. In other words, despite the marital separation and the filing of a divorce proceeding, Sharon Groesbeck's will and living trust remained valid and unamended.
If the Groesbecks had lived in any other state, the result would probably have been the same. The mere filing of a divorce proceeding, and even the separation, would probably not result in a revocation of either a will or a living trust.
Arizona law, like that of most states, does provide that a completed divorce revokes a pre-existing will in favor of the former spouse. With the growing popularity of living trusts, that law was extended two years ago to include them, as well as life insurance and other beneficiary designations. Of course, property settlement agreements in the course of the divorce may change some of the law's default provisions.
Even with changes in the law, divorced spouses should not assume that their documents will be properly interpreted. Recently divorced spouses should make prompt changes in their estate plans, taking into account their changed situations.