Estate of Wilson, 2012 WL 6216869 (1st Dist. 2012)
A recent case, the Estate of Wilson, 2012 WL 6216869 (1st Dist. 2012), illustrates generally why escrow holders should avoid giving advice to parties to an escrow on how to take title to real property: Choosing the manner in which to hold title may be impacted by other agreements that are not even a part of the escrow and of which the escrow holder is entirely unaware.
Background: The Wilson case arose because of a claim brought by a man, Konou, who was both registered as a domestic partner and married to the decedent; he claimed an interest in the decedant’s estate as an “omitted spouse.” The will was executed by the decedent decades before meeting Konou. Both parties had signed a domestic partnership agreement that included waivers of any rights, claims, or interest in future property, income, or estate of the other. The domestic partnership agreement required a signed writing to amend or terminate the domestic partnership agreement. Konou asserted that the marriage license, entered into a few years after they became domestic partners, operated as such a writing, terminating the property arrangement set forth in the domestic partnership agreement.
The Court’s Holding: The Court of Appeal held that the domestic partnership agreement was not automatically invalidated by the marriage license. The Court relied on existing law providing that a marriage license does not invalidate a prenuptial agreement. Indeed, if it did, there would be no point to a prenuptial agreement. Extrapolating, the Court determined that these same rules applied in the context of a domestic partnership agreement. Neither a marriage certificate or a declaration of domestic partnership modifies or terminates any existing agreement regarding the division of property. Because Konou expressly waived his rights to any interest in the decedent’s estate in the domestic partnership agreement, he could not claim an interest as an omitted spouse.
Comment: This case illustrates several points:
The marriage in this case was entered into during the brief window in which same sex couples could marry. While these same-sex marriages remain valid, same sex couples now wishing to enter into a state-recognized union must do so by registering as domestic partners.
Just as with prenuptial agreements, courts will enforce domestic partnership agreements regardless of the change in status from domestic partners to spouses (if, for instance, a couple was legally “married” in one of the states permitting same-sex marriages).
Escrow holders may be completely unaware of existing agreements between or among the parties that are not part of the escrow. The parties make decisions based on information and agreements that may be in writing or may be oral, but—more importantly—are not known to the escrow holder, emphasizing why they should not give advice to the parties as to how they can or should hold title. At most, escrow holders should be cautioned only to provide descriptions of ways to hold title, but direct the parties to seek advice from a lawyer or tax professional for actual recommendations.