This question was asked by a client this week and it immediately made me realize that there are probably others who have the same question.
If you read this blog regularly or follow Lenza Law Firm on social media, you already know that creating an estate plan is one of the most important things that you will ever do. When you and your spouse have separated or divorced, creating or revising your estate plan is not generally top of mind. However, if you have minor children it is urgent for you to discuss your estate planning with your ex-spouse.
What do I have to revise in my Estate Plan following my divorce or separation?
There are three important estate planning issues that need to be considered after a divorce or separation:
Please allow me to deal with each issue individually as all are equally important, and each of these issues requires changes to any existing estate plan. If you don’t currently have an estate plan be sure to address all of these issues with your advisor when creating your plan.
One major concern during a separation/divorce is what will happen to the inheritance of a child once a parent passes on. Common sense tells us that a minor child will not be in any position to handle the complexities of handling an inheritance. As we have discussed on this blog, a guardian is typically placed in charge of an inheritance. Typically, when parents are divorced/separated and have a minor child, the guardian of both the person and property of the will be the surviving ex-spouse. MANY people have a big issue with this as some marriages don’t exactly end on the most amicable of terms. Doing some simple planning avoid this issue. Placing your child’s inheritance in trust until he or she reaches an appropriate age solves this problem. The added benefit is that you can actually set the distribution to occur at any age that you want. Many people now want to hold their child’s inheritance until they reach an age where they expect them to be more settled and less likely to engage in some spendthrift activities. Until the child reaches the designated age, a third-party would be selected as trustee who will have the responsibility of maintaining the trust and distributing the income and assets either to the guardian for the benefit of your child, or directly to vendors and service providers for the benefit of the minor child. One word of caution however, is to remember that both your trustee and your guardian will often be required to work together as the minor ages, so be sure to avoid a designation of a trustee that conflicts with that of your ex-spouse. The best idea is for you and your ex-spouse to agree on someone with whom you both are comfortable to serve in this role.
Planning for the Possibility of Remarriage
We know that when most couples get married, their finances overlap at least to some degree. The same is true for a subsequent marriage following divorce. So what happens if you fail to include provisions in your estate plan for your minor children from a previous marriage? It is possible that your new spouse could stand to inherit the majority of your estate, leaving a minor child or children without a share of your inheritance reflective of your wishes. We can prevent this from happening by including some simple provisions in your estate documents.
Guardianship Issues Following Divorce
Expounding on the issues above, as a general rule, if one parent passes away, guardianship automatically passes to the surviving biological parent, regardless of the status of custody, unless the surviving parent is determined to be unfit. What many people fail to realize however, is the possibility that a minor child may need a non-parental guardian prior to reaching the age of maturity. This typically happens when the surviving parent also passes away prior to the child turning eighteen. For this reason, it is important to discuss guardianship issues with your ex-spouse. As is almost always the case in estate planning, if you can come to an agreement on this issue and memorialize it prior to the death of one ex-spouse, everyone can feel rest assured that the child will be taken care of properly, both physically and financially.
This is just a small snippet of issues facing separating and/or divorcing parents of young children. If you have any specific questions you can always reach out to our office and we will be happy to let you know if we can be of any assistance.
Have a question for the blog? Post it in the comments or send an e-mail to email@example.com and we’ll see if we can’t answer it for you!