Estate Planning and Divorce

Posted in Triplett & Carothers on December 5, 2024

 

There is so much to think about when a couple decides to divorce, and frequently emotions take over and prevent the couple from considering important details.

Estate planning is one item that frequently falls through the cracks. To be fair, even though estate planning is something everyone should do, many people put it off even when they are not getting divorced.

But with the dissolution of marriage, estate planning becomes more of a priority; before the divorce is finalized, spouses have certain legal obligations to each other that may not align with their post-divorce intentions. For example, if one spouse dies while the divorce is in process, the surviving spouse will inherit at least a portion of the decedent’s assets following the state’s intestate succession laws. That result may not be what the divorcing couple would wish.

The key strategies

Consider these nine strategies to help ensure your estate is protected and the divorce goes as smoothly as possible.

1. Pre- and postnuptial agreements. These are contracts that set out how the couple’s assets will be divided in the event of divorce. While state law may differ on exactly how pre- and postnuptial agreements are viewed during divorce proceedings, courts generally honor the documents. However, the courts are not bound by provisions affecting the care, support and custody of children.

2. Beneficiary designations. In most states, certain beneficiary designations (e.g., those made for qualified retirement accounts and plans, pensions, and life insurance policies) cannot be changed until the divorce decree is issued. Your estate planning attorney should be provided with a list of these plans and policies so that the beneficiaries can be changed as soon as the court finalizes the divorce.

3. Wills and trusts. These documents should be carefully reviewed by your estate planning attorney. Depending on state law, it may be possible to execute a new will and amend any trusts during the divorce process.

4. Health care proxy. If you have a health care proxy already in place, be sure the agent named in the document is a person you trust to make decisions on your behalf. If not, a new document should be drafted to name a new agent.

5. Power of attorney. If your soon-to-be-ex-spouse has durable power of attorney, it is important to revoke it and execute a new one. If this is not done, they may have access to assets being contested in the divorce.

6. Elective share. Unless there is a waiver (perhaps in a pre- or postnuptial agreement), in most states a decedent spouse may not disinherit their surviving spouse. This rule remains in place until the divorce is finalized. The amount of the elective share varies according to state law, but generally ranges between one-third and one-half of the decedent spouse’s estate.

7. Practical details. Divorce, by its very nature, creates anxiety. Have a list of the things that need to be done to protect your privacy and finances during the divorce. In addition to the items listed above, you should:

  • Create a list of assets and liabilities
  • Track monthly expenses
  • Open a separate bank account (but, unless advised by your attorney, do not use funds from a joint bank account to do this)
  • Close joint charge and credit accounts and open new separate ones
  • Change shared passwords and passwords for any other accounts the soon-to-be-ex-spouse may have access to
  • Get a new email address and possibly new social media accounts
  • Consider getting a post office box for your mail

8. Minor and disabled children. Custody, guardianship and visitation for children are major concerns for many throughout the divorce process. The courts will put children’s safety at the forefront when deciding these issues.

9. Tax and estate planning. Be sure to involve your tax and estate planning advisors about your divorce. There may be some steps that can be taken during the process (e.g., retitling assets) to protect your interests. Doing so will help ensure your wishes are carried out in the event of your death. Once the divorce is finalized, your advisors will be ready to begin taking the steps needed to revise your estate plan to reflect your new circumstances.

Keep focused, and you can get through divorce with your estate plan intact.

Reach out to Roz Carothers and her team at Triplett & Carothers to learn more.

©2024