Divorce and Your Estate Plan – Points to Know
Divorce results in a major property shift. Some of it obvious. Some not so much. As couples and their divorce lawyers negotiate, it is very possible that important elements regarding properties’ titling and their estate plan could go unnoticed until later. To help protect your interests even before your marriage, you should consider meeting with a prenup lawyer Chicago.
Here are some points to consider.
Real Estate and Other Asset Titling. For couples represented by a competent divorce attorney, the question of titling of the family residence is center stage. If one spouse receives the residence, the property would be retitled from tenants by the entireties, a category available only to married persons, into the name of the individual spouse. Questions regarding an outstanding mortgage also need to be resolved. In our “do it yourself” culture where spouses might try to handle their own divorce, it can happen they forget to consider titling and related financial issues. Working with a divorce attorney is very important for this reason, as if this is neglected, on divorce a property’s ownership becomes muddled. Titling of other assets such as bank accounts needs to be reviewed also since joint titling of bank accounts leaves everything to the survivor.
Individuals represented by counsel will typically have a Property Settlement Agreement that will not only consider titling but also name which party will assume certain debts and provide a comprehensive statement regarding finances.
Wills. Most married couples name each other as mutual beneficiaries under their Wills and then, on the death of both, to the children equally. Wills need to be reviewed and redone to make certain assets on your death go as you want them to.
Non-Probate Assets. If your former husband or wife was named as beneficiary of life insurance, annuities or other non-probate assets, you likely will need to make adjustments. In some cases property settlement agreements contain provisions requiring life insurance to continue for a period of time. Know what your arrangements are. Not all assets pass by Will.
Pensions and Retirement Funds. Your former wife or husband may have been named as beneficiary under your pension fund. If done years ago you might have forgotten. Your pension could be a single life, meaning it ends on your death, or you might have opted for what is referred to as a “joint and survivor annuity” meaning either all or a percentage of what you would be receiving monthly would go to your beneficiary. Also check beneficiaries of your IRA’s, 401(k)’s, SEP’s and similar retirement funds.
Trusts. This might be time either to consider a trust or to review, modify or revoke a Trust. This is especially true if you have minor children and would like a party other than your former spouse to manage funds going to your children. This is one area where serious review is needed and an elder law or trusts and estates attorney can help.
Powers of Attorney and Health Care Powers of Attorney. If your former husband or wife is your agent under Power of Attorney to handle financial affairs you need to review and decide who should occupy that position instead. Maybe less obvious but extremely important would be your Health Care Power/Advance Directive/Living Will. Do you really want your former spouse making life and death decisions affecting you?
Life Insurance. Life insurance is often made a planning tool in divorces. This can be especially important where there are younger children but also to rebalance the distribution. This can be the time for examination of beneficiaries or taking out life insurance for planning purposes.
Pre-Nuptual and Post-Nuptual Agreements. If you had a pre-nuptual or post-nuptual agreement this is the time to take it out and review carefully.
Tax Considerations. When you are no longer a couple you need to know the tax effect. Note that, generally speaking, beginning January 1, 2019, alimony or separate maintenance payments are not deductible from the income of the payer spouse or includable in the income of the receiving spouse if made under a divorce or separation agreement executed after (or in some circumstances modified after) December 31, 2018. As with any tax related issue you should check with your accountant or tax professional for details to see how this affects you. Child support is never deductible and is not considered income. https//www.irs.gov taxtopics , Topic No. 452.
After Divorce and If You Remarry. Remarriage can affect much of the above. A full review can reflect your wishes and needs to be thoughtfully done.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.