Bill Affecting Estate Plans Signed by Governor Brown

Last month Governor Brown signed SB 182, which addresses certain spousal rights as they pertain to estate planning. Of note, the bill addresses the impact of divorce on a spouse’s agency under a power of attorney and extends liability protection for property held as tenants by the entirety (how most married couples take title to real property) when property is transferred to a revocable living trust.

Termination of Spouse as Agent Upon Divorce

Under the current law, if you file for a divorce, annulment, or separation from your spouse but have a power of attorney naming your spouse as your agent, the dissolution proceeding and subsequent judgment for annulment, separation, or divorce does not affect the validity of your power of attorney unless specified in the judgment. In other words, unless specified, your ex-spouse would still be your agent under a power of attorney unless you revoke their authority.

SB 182 creates a restraining order against a current spouse from acting under a power of attorney upon the filing of a petition for divorce, separation, or annulment. It further terminates an ex-spouse’s authority under a power of attorney upon a judgment for dissolution, annulment, or separation, unless otherwise specified by the Court. If the power of attorney names an alternate agent, that person would become the new agent upon the entry of judgment in the dissolution, etc.

Jointly Owned Property

When a married couple takes title to real property as tenants by the entirety, the property is protected from a forced sale due to a creditor claim against only one spouse. If property passes to a surviving spouse on the death of their spouse and the decedent spouse had unpaid creditors, the deceased spouse’s creditors cannot force a sale of the home or otherwise encumber the property to satisfy the decedent spouse’s debt.

Under current law, if a married couple owns property as tenants by the entirety and they transfer the property into a revocable living trust (either joint or separate trusts), they terminate the creditor protections of tenants by the entirety.

SB 182 preserves creditor protections for married couples who transfer real property owned as tenants by the entirety to their joint or separate revocable trusts as long as: (1) the spouses remain married to each other, (2) the real property continues to be held in trust by the trustee(s) or successor trustee(s), and (3) both spouses are the beneficiaries of the trust or trusts.

SB 182 is effective January 1, 2022. However, the bill is not retroactive, meaning that if you have transferred real property that you own with your spouse into a revocable trust and wish to gain back the  creditor protections afforded in SB 182 you will need to first transfer the home from your trust to each other as tenants by the entirety, and then back to trust.

If you would like to speak with one of our attorneys about SB 182 please call our office at (503) 206-6401 or schedule a consultation online.





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