Spiegel v. KLRU Endowment Fund,
Other Estate Planning Matters
Mediated Settlement Agreement
While Husband and Wife were in the process of divorcing, they entered into a mediated settlement agreement which allocated community property, accounts, life insurance, and other property. One day before the hearing to finalize the divorce was to occur, Wife died. The trial court held that the agreement was enforceable even though it was never incorporated into a valid divorce decree. Husband appealed.
The appellate court affirmed. The court recognized that this issue was one of first impression in Texas. The court held that the agreement was “enforceable on the plain language of the statute and the public policy underlying it, as well as the parties’ intent as expressed in the language of the agreement.” Spiegel at 241.
Accordingly, the court determined that the agreement was sufficient to revoke the beneficiary designations in Husband’s favor with respect to nonprobate assets in Wife’s estate such as life insurance and retirement plans. The court rejected Husband’s claim that the trial court lacked jurisdiction over nonprobate assets and that the mediated settlement agreement did not extend to beneficial interests. Recognizing a split of authority, the court held that the better view was that the allocation of nonprobate assets to one spouse as that spouse’s separate property acts to revoke a beneficiary designation of the asset in favor of the other spouse because people who are divorcing intend to revoke beneficiary designations in favor of the soon-to-be ex-spouse unless there is express language to the contrary.
Moral: Individuals entering to agreements to settle property matters in a divorce action should include a clear provision addressing what is to happen if one or both parties dies in-between the date the agreement is signed and the divorce is final.
Testatrix’s will devised “our homestead” to Husband. However, upon Testatrix’s death, they did not have a mutual homestead as they were in the process of divorcing. Husband lived in a separate residence which he had already established as his tax homestead. In addition, Husband had agreed in a mediated settlement agreement that Testatrix would keep their former home as her separate property. Accordingly, the trial court held that the devise adeemed and Husband appealed.
The appellate court affirmed. The court focused on the exact terms of the devise which did not specify a precise parcel of property. Instead, it used the term “our homestead” and it was clear that they did not have a mutual homestead at the time of her death. Husband had abandoned the property prior to Testatrix’s death. Accordingly, this devise adeemed.
Moral: A person should immediately revise the person’s will upon filing for divorce and remove provisions in favor of the soon-to-be ex-spouse to avoid issues such as those raised in this case.