Category: Estate Planning
Helpful Tips and Facts
Estate Planning Issues to Keep in Mind
You may have had a will drawn up during your marriage, or perhaps a revocable living trust. Both of these documents may have named your spouse as either a personal representative or successor trustee. Your ex-spouse may also have been named as the agent in fact in your Durable Power of Attorney. There may also have been children involved. It’s important to consider these issues and others while deciding to update your estate planning documents. You’ll want to meet with your estate attorney and discuss your next steps. Don’t forget to take this important step in moving ahead.
Revisit your Will, Power of Attorney, or other estate planning
After a divorce most estate planning work becomes invalidated since you likely no longer want to leave anything to your ex-spouse. State law may automatically disqualify the documents that name an ex-spouse simply because the documents name someone for entitlements they no longer have. Particularly if you have minor children, be sure to revisit your Will and elections for who will be appointed to care for your children and any financial assets on their behalf. Updating these documents will ensure that, in the event of your unexpected incapacity or death, your children and your assets are cared for by who you want in the manner that you want, preserving your wishes and legacy.
When a Parent Remarries
Perhaps the newly divorced parent remarries. The parent may unintentionally disinherit a child, as without legal documentation to indicate otherwise, a spouse is generally entitled to one half of the deceased spouse’s estate. The divorced parent may desire to leave assets to care for both the new spouse, and the children. In such a situation it may be very important for the parent to sit down with a financial advisor or their estate planning attorney to assess their options. An easy solution is the use of additional life insurance to assist the parent in their wishes to provide for both the care of minor children and the new spouse. Term insurance can be a low-cost solution to provide these benefits until the children reach adulthood, assuming the parent is insurable.
Revocable Trust Information
Revocable trusts, often known as Living Trusts, are more complex in their drafting and may require further consideration, as the divocee may need to amend beneficiaries and/or trustee powers to eliminate the former spouse. Finally, advanced estate planning structures such as irrevocable life insurance trusts (ILIT’s), Qualified Personal Residence Trusts (QPRT’s), and charitable trusts may be very difficult, if not impossible to amend, since the original intent of creating these structures was to make an irrevocable election, usually structured to benefit both husband and wife together. Should the husband or wife assume the power to change the irrevocable election, the tax advantages gained by the structure may be undone. The divorcee will need to work closely with his or her attorney, as well as trustees, to explore possible options.
Financial and Estate Clean-Up After Divorce
Here is a list of the important items you may want to consider amending: 1. Beneficiary designations for the following financial instruments: Employer Retirement plans, Individual Retirement Accounts (IRA), Life insurance, Annuities, Health savings accounts. 2. Transfer on Death (TOD) investment accounts 3. Payable on Death (POD) bank accounts 4. Will 5. Health care powers of attorney and living wills 6. Powers of Attorney 7. Revocable trusts 8. Advanced estate planning structures such as irrevocable trusts
Get A Will After The Divorce
If you have minor children and no will, at least half of your estate goes to the children but since they are minors it really goes unsupervised to the surviving parent. If you don’t trust that parent will use your money wisely, you need to have a will stating who will be trustee of your children’s money.
Death Comes to Us All
Making a will is an understandably easy decision to postpone because most people do not like thinking about their own mortality. A failure to do so, however, can cost loved ones money (in taxes that can be avoided). And at the least, property distribution under the laws of intestacy slows the settlement of an estate. For most couples, a mirror-image will (all to him from her, all to her from him) is easy and inexpensive. A young couple with children should always remember that both of them could die at the same time in an accident. Most lawyers recommend the election of primary, secondary and tertiary beneficiaries.
Death During Divorce
Death rights should always be remembered in a separation prior to divorce. Spouses, even those in the midst of divorce, have rights to each other’s property. When negotiating a marital settlement agreement, therefore, it is a good idea to agree to terminate these rights if the death of one spouse is possible.
You Should Have a Will
This is typically not the first thing on anybody’s want list, but yet it always seems to loom in the back of one’s mind. Do yourself a favor, especially if you have children, and draft and execute a will. Many spouses, while married, will have some kind of estate planning involving a will, but let it be known that once divorced, the will in place becomes null and void. Most divorce lawyers provide his or her clients with a "do to list" for once the divorce is finalized and one of the first things on this list is revisiting or creating a new will.
Alimony Payments Upon the Death of the Payor
Many times an alimony trust will be put in place in conjunction with other trusts and estate planning tacitcs to ensure that alimony payments are made if the payor pre-deceases the payee. Another approach to payments after death would be to take out a life insurance policy with the payee as the beneficiary.