In the April 2020 Nevada Supreme Court opinion In re Colman Family Revocable Living Trust, the Nevada Supreme Court read the plain language of Nevada Revised Statute (NRS) 111.781 to determine that the effect of divorce under Nevada law was to revoke the disposition of real property from one spouse to the other contained in a revocable trust.
The Facts Of In Re Colman Family Revocable Trust
Paul and Chari Colman created the Colman Family Revocable Trust. When Paul and Chari were married, they lived in a home that Chari owned as her separate property. The home was purchased by Chari before she married Paul. Chari later transferred the property to the family trust via a quitclaim deed but did not change its status as her separate property.
The Trust named Paul and Chari as its primary beneficiaries and provided that after both of them died, Tonya Collier was the beneficiary of the subject property.
Paul and Chari divorced. One month after Paula and Chari divorced, Chari died.
Collier sought to confirm her status as beneficiary of the real property under the trust. Collier asserted that the divorce precluded any disposition of the property to Paul.
The Nevada probate commissioner found that Collier was the vested beneficiary of the real property and that the property should be distributed to her. The district court adopted the probate commissioner’s findings.
What Is The Effect of Divorce On Revocable Property Transfers In Nevada?
NRS 111.781 governs the effect of divorce or annulment on nonprobate transfers of property and states, in pertinent part:
1. Except as otherwise provided by the express terms of a governing instrument, a court order or a contract relating to the division of the marital estate made between the divorced persons before or after the marriage, divorce or annulment, the divorce or annulment of a marriage:
(a) Revokes any revocable:
(1) Disposition or appointment of property made by a divorced person to his or her former spouse in a governing instrument and any disposition or appointment created by law or in a governing instrument to a relative of the divorced person’s former spouse;
Therefore, NRS 111.781(1) automatically revokes any revocable disposition from one spouse to another upon divorce.
How Do You Prevent Automatic Revocation Of A Property Disposition Upon Divorce?
In order to prevent the automatic revocation of the revocable disposition under the statute, there must be a governing instrument demonstrating an intent to the contrary.
Here, there was no other governing instrument demonstrating that Chari did not want the automatic revocation to take effect.
Does Divorce Invalidate The Entire Trust Document Under Nevada Law?
No, a divorce does not invalidate an entire trust document under Nevada law, just the disposition to the former spouse. Paul argued that if the revocation statute applied because of the divorce, then the entire trust was invalidated, including Collier’s interest in the real property. The Nevada Supreme Court rejected this argument, holding:
NRS 111.781(3) provides that, upon revocation of the disposition to the former spouse, the remaining trust provisions are given effect as if the former spouse had disclaimed his interest. Accordingly, the district court did not err by affirming the remaining terms of the trust.
This case highlights the importance of revisiting your estate planning upon divorce. Laws in many states, see here, here, and here, automatically invalidate bequests and dispositions upon divorce. Such provisions are generally intended to implement the intent of the divorced person who neglects to change their estate planning. In this case, Paul argued that Chari wanted him to have the real property. Because Chari did not execute a governing instrument negating the automatic revocation under Nevada law, the disposition was automatically revoked.