2017 Probate Omnibus Bill: What’s Missing?

The 2017 probate omnibus bill is notable not just for what it contains, but also for what it does not contain.

The original version of the bill was HB 0567. It contained several sections that addressed the effect of divorce or annulment on an estate plan. Under current law, divorce/annulment, by itself and without any further action of the testator

revokes any disposition or appointment of property made by the will to the former spouse, any provision conferring a general or special power of appointment on the former spouse, and any nomination of the former spouse as executor, trustee, conservator or guardian, unless the will expressly provides otherwise.

Similarly, a decree of annulment, divorce, dissolution of marriage, or legal separation revokes a previous designation of spouse as agent under an advance directive, unless the court decree or document says otherwise. Other lifetime and testamentary arrangements require corrective action to remove the former spouse as beneficiary or fiduciary.

Sections 10, 14, and 16 of HB 0567 attempted to remedy the situation. These sections covered, respectively, contractual relationships, such as beneficiary designations and payable on death designations; powers of attorney; and revocable trusts (but not irrevocable trusts). Provisions for an ex-spouse under these arrangements or documents would have been automatically revoked. Unfortunately, these provisions did not survive the legislative process. Therefore, clients cannot rely on the law (or a judge) to save them from the consequences of failing to update their estate plans post-divorce.

Another notable omission from the omnibus bill is any kind of legislative response to In re Estate of Fletcher, 2016 WL 3090920 (Tenn. Ct. App.). That case involved a certificate of deposit that was titled in decedent’s name alone. The decedent purchased the CD using proceeds derived from refinancing the house he owned with his wife. The house had been titled to the couple as tenants by the entirety.  The surviving spouse successfully argued that the decedent’s unilateral actions were not sufficient to sever the tenancy by the entirety. Thus the CD passed to the surviving spouse by operation of law, notwithstanding the legal title on the account.

This case troubled some practitioners, who worried that personal representatives would no longer be able to rely on legal title in determining whether assets are includible in the decedent’s probate estate. They were concerned the case would impose upon personal representatives the burden of determining whether each putative estate asset had ever been owned by the decedent and the surviving spouse as tenants by the entirety. The case is currently on appeal to the Tennessee Supreme Court. It is for this reason, presumably, that the legislature chose not to address the issue for now.

Sources: T.C.A. §§ 32-1-202, 68-11-1804

Posted by Joel D. Roettger, JD, LLM, EPLS

Tags: , , , , , , , , ,

Comments are closed.