What is the impact of divorce on the estate planning process?
Divorce, like any other life-altering event, has direct effects on the estate planning process. As you plan for your financial future, it is important to have a skilled, trustworthy estate planning attorney at your side, not only to help you establish your initial plan, but to assist you in making any necessary changes.
If you are contemplating divorce, previous decisions have to be reviewed and redrafted. Many documents will have to be revised and issues rethought. The following matters may require attention:
- One of the first issues that must be addressed is the re-creation of a will. When you first consult with an estate planning attorney as a couple, a will is drafted for each spouse. As you consider divorce, you have to review previous decisions, including who will be your beneficiary and your executor once you are no longer married. You should be aware that, in some states, wills created during a marriage are void following divorce unless they are re-ratified. This means that unless you create a new will, you may die intestate.
- You will also have to re-analyze the gift and estate tax elements of your estate plan. With your attorney's help, you will have to modify several of your estate planning documents during your separation or at least before the divorce becomes final.
- It is essential to draft a separation agreement as quickly as possible to clarify each spouse's rights regarding property, child support, debts and possible temporary alimony. If one spouse has the expectation that he or she will be receiving alimony and child support from the other, the recipient should have it written into the separation agreement that the spouse must purchase (or continue to keep in force) a life insurance policy which names the recipient as beneficiary. Such a policy should be for an amount large enough to cover alimony, child support, and property distributions.
- As unpleasant as it may be, the attorneys involved have to consider the possibility that one spouse may die before the final divorce decree is finalized. If such a misfortune occurs, each spouse should ensure that any agreement signed is also binding for his or her designated heirs of fiduciaries.
- In amending an estate plan, couples planning to divorce should make sure that their soon-to-be ex-spouse no longer has power of attorney and is no longer designated as a personal representative, successor trustee or beneficiary. Furthermore, in the event that one member of the couple becomes incapacitated, it is essential that someone other than the person being divorced makes financial decisions. Someone other than the estranged spouse should also be charged with the Advanced Health Care Directive.
Divorce affects your future in many complicated ways, financially as well as emotionally. That's why it is so necessary to consult with an experienced estate planning attorney when you are contemplating such a major life change.