How Your Divorce Affects Your Estate Plan
As Bill and Melinda Gates prepare for their upcoming divorce, questions arose regarding what that does to their overall plans for the future, like anyone who approaches divorce attorneys or child support lawyers. When a couple worth megabillions splits what happens to all they have built together? One answer is they have a previously arranged settlement agreement with the help of some reputed divorce services who are not currently available for public disclosure. Regardless of the couple’s net worth, they should consider working with an expert in family law like a family law attorney to achieve desirable results for their separation.
Still, what is the effect on relatively ordinary couples who divorce and how does that affect their estate plan, not only on death but during lifetime? As you might imagine many mistakes are made and often Jensen Family Law`s lawyers are contacted for solution. Here are some considerations.
Real Estate Titling. For couples represented by competent family law lawyers from Beverly Hills, the question of titling of the family residence is center stage and, if one spouse receives the residence, that property should be retitled from tenants by the entireties into the individual name of that spouse. In our “do it yourself” culture where spouses might try to handle their own divorce, it can happen they forget and find an estate planning lawyer to solve this issue. On divorce a property titled tenants by the entireties, an ownership form only available to spouses, the property then becomes owned as tenants in common meaning each person can sell his or her individual share. Titling of other assets such as bank accounts needs to be reviewed also since joint titling of bank accounts leaves everything to the survivor.
Wills. If you, like most married couples, named each other as mutual beneficiaries under your Wills and then, on the death of both of you, to the children equally, then you need to review your Will with the guidance of lawyers for estate planning help to make certain your assets on your death go as you want them to with the help and assistance from the lawyers for special needs planning. Remember, not all assets pass by Will. Some pass automatically. See titling above.
Pensions and Retirement Funds. Did you name your Wife or Husband as beneficiary under your pension? If done years ago you might have forgotten. Your pension might 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. You should check. How about beneficiaries of your IRA’s, 401(k)’s, SEP’s and similar retirement funds? Have you checked?
Trusts. This can be time either to make 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. Is your Husband or Wife your agent under Power of Attorney to handle your financial affairs? That is an obvious area to consider for correction. 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. The lawyers for prenups support it. This again can be especially important where there are younger children but also if alimony is being considered. This can be the time for examination of beneficiaries or taking life insurance for planning purposes.
Pre-Nuptual and Post-Nuptual Agreements. If you had a pre-nuptual or post-nuptual agreement this would be the time to take it out and review carefully.
Tax Considerations. When you are no longer a couple but are filing individually are you ready for the change? 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. Whether you remarry or not, you should review all of the above both before the final Decree and after your divorce to be certain the disposition of assets follows your wishes.
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.