Divorce-Proofing Your Estate Plan
Parting ways with a spouse doesn’t have to mean parting ways with your wealth.
Divorce is among the biggest stressors a person can face in their lifetime. Whether amicable or acrimonious, a divorce is an enormous life change that can lead to significant shifts in assets. When couples negotiate a divorce, it is possible for some of the details of an estate plan to slip their minds amidst bigger picture considerations like children and division of property. Having an estate planning attorney that you trust is an important step toward ensuring that your assets are protected in the event of a divorce, including after you die.
Who Is Still In Your Will
Nine times out of ten, a married couple’s will states that assets upon death pass to the living spouse and, on that spouse’s passing, to their children. Divorcees, however, might decide they no longer want their ex to be beneficiary. That means getting proactive about having their legal documents officially reviewed, revised, and refiled to make sure assets end up where intended.
First, there is no need to freak out! It is advisable to handle this in a timely manner, but you do not have to run to your attorney the moment the ink is dry on your divorce agreement. State law provides some protection without you having to act. For the purposes of estate planning, an ex-spouse is actually considered to have predeceased the spouse, which leaves them with no claim to assets.
While this provides useful protection in certain cases, relying on automatic laws on the books to cover your assets is not an actual plan. That is the safety net, not the trapeze. Your ex may still be eligible to receive pension benefits or other contract-based benefits. You should be proactive, and work with an experienced attorney to understand exactly what your arrangements are and adjust them appropriately.
Who Do You Trust with Your Kids’ Money
It is common in divorce agreements that one spouse be mandated to maintain a life insurance policy to benefit a couple’s children in the event of their passing and inability to make child support payments. What is far less common is specifying who will manage any money paid out by the insurer. It is important to know you have options when it comes to who you want in charge of those funds. Again, a divorcee may decide that they do not want their ex to have that kind of control. One legal path you can take to ensure that does not happen is creating a trust.
At DuBois Law Group, we seriously love trusts. You can read all about it here. When it comes to divorces, creating a trust allows you to keep the terms of an original agreement with an insurance company, but instead of naming your children as direct beneficiaries, you establish the trust as beneficiary. The benefit here is that you can then assign a trustee to manage the payouts. Please be aware, though, that this is an area of the law where particularly careful review is necessary, and you will definitely want to consult with a trusts and estates, or elder law attorney for help.
Who Gets Your Hard-Earned Money
When you are already dead, no one can ask you where you want your assets to go. Don’t leave anything to chance. When you set up an estate plan, make sure that things like life insurance policies, pensions, 401ks, IRAs, and similar retirement funds have very clear beneficiary designations. Know how, and to whom, your pension will be paid if you should die. Sort out details like whether yours is a “single life” or “joint and survivor annuity?” Again, choose an experienced lawyer to walk you through this and, more importantly, make sure all related legal documentation is aligned with the terms of your estate plan.
Say ‘I Do’ to Yearly Maintenance
Divorce is one of dozens of different factors that can affect an established estate plan over time. We address it, and all the other factors, with clients who take advantage of our annual maintenance program. Annual maintenance means sitting down with a client on a regular basis to talk about any changes in their day-to-day lives, and how they might be affecting their preexisting legal arrangements. If so, we correct things accordingly. Our systematic approach helps people protect your wealth by responding to changing circumstances as they develop, rather than reacting to them once they have become urgent.
This is one more way our team works to provide clients with the best possible asset protection and the peace of mind that comes along with it. Like we have said before, you do not have to trust us, but you really should speak to an experienced attorney who will guide you through the process of creating a sound estate plan, or updating an existing estate plan, to address the big life change you are experiencing.
What about remarriage? That is a blog for another day.