Will Divorce Affect My Estate Plan?

In entering a final judgment of dissolution of marriage, a court reshuffles the marital estate.  Property that used to be jointly held becomes the separate property of one or the other spouse.  Often, this reshuffling could impact specific bequests in a will and would need an amendment to correct.

But the greatest reshuffling occurs by the fact of divorce itself – a couple is no longer husband and wife, and each has forfeited by law claims to the estate of the other unless the court provided otherwise in the judgment of dissolution of marriage.  So, for example, in a simple will where a spouse left the bulk of his or her estate to “wife” or “husband,” the divorce terminates that status and the right to claim a share to a former spouse’s estate.  Similar regulations apply to beneficiary status on life insurance policies.

But the simple fact that status may terminate upon divorce does not negate the need to clean up estate issues.  In even the simplest case, where the only heir would be the former spouse, the failure to designate another heir will result in the estate reverting to the state.  To assure that your wishes are reflected in your estate, you should immediately amend your will to reflect your wishes as to who should inherit in the event of your death.

Besides wills, many couples put their assets into living trusts because of tax advantages.  Even though the court will divide the shares of the trust in the dissolution, the language of the trust may still give the former spouse some control over or claim to some part of the trust that otherwise should belong only to one spouse.  The parties should take steps prior to dissolution to sever the trust into two separate trusts with asset transfers and each spouse may write terms of his or her trust to conform to his or her wishes as to control and disposition of assets.

Where the parties have children of the marriage, restructuring the estate plan becomes more important and more complicated.  In all likelihood, the couple during the marriage had a will that left the estate to the children, probably in a trust, and designated the other spouse as the conservator for the estate if the children are minors – or longer if a spendthrift trust.  Upon divorce, the assets have changed and the trusts will no longer exist in the same form.  New trusts will need to be drawn up to address this void.  If former spouses do not immediately amend the terms of their wills and trusts, a former spouse may still retain control over the children’s allocated shares, which would give that former spouse access to funds in a manner not intended or anticipated.

When individuals divorce, multiple generations of family may be involved in estates – for example, grandchildren having claims to shares in grandparent trusts.  It is essential that all potential claims to family assets be reexamined to clarify the intent of the grantor and keep control of any trust away from a former spouse.

A final consideration involves remarriage.  When an individual remarries, he or she will establish a new family and have stepchildren or even new children by birth.  The new family may have different needs than the old family; the grantor spouse may want to differentiate the estate between children of different families.  To protect such intent, the spouse will need a new estate plan that specifically addresses all of these issues.  Failure to make a new estate plan could allow the children to claim a statutory share against the estate or inherit in a manner not intended by the grantor spouse.

If you have questions about estate planning and divorce, contact us – we can help.

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