Comprehensive estate planning is an important part of life. It is an effective way to make sure the assets you have earned are protected and can be distributed to your loved ones when the time comes. Often, younger married couples engage in mutual estate planning together – especially when children enter the picture. While that is a crucial step in securing your financial future, some marriages end in divorce. When that happens, you need to effectively plan ahead for the issues you might face as a result of your divorce.
Hold onto Assets
Maintaining control of your property is important. A divorce can invalidate an ex-spouse’s claim to your property, which means there is little chance that they might obtain things like a home should you suddenly pass away.
However, when minor children are involved, your former spouse may still be able to exercise a significant amount of control over your estate – particularly if such assets are left to minor children via a Last Will and Testament. Many assets left to minor children, like homes and vehicles, is held by a guardian until the child is of age to take control of the asset. If you have not nominated someone to fill that role or have not set up a trust to benefit your minor children, an ex-spouse may be able to control such assets until such time as the children can independently do so. That can have a significant impact on the value of those assets depending on how they are managed.
There are a number of different types of trusts that can be utilized to meet your estate planning needs. Trusts can be used to keep assets safe for children within your marriage and they can also be used to protect assets that you might want to secure for children in subsequent marriages. Basically, trusts help take property out of your taxable estate and can be created in a way that shelters such assets from creditors and other financial consequences that may accompany your divorce.
You can even create trusts that can provide a source of income for a surviving spouse but that will maintain those assets for beneficiaries after the surviving spouse passes away. An experienced estate planning attorney can help you explore the various options you have when it comes to trust, and your estate planning attorney can work with you to revise your estate plan after a divorce to better meet your changing needs.
Sometimes, divorce can invalidate a Last Will and Testament. However, that does not mean you should rely on that in lieu of revising important parts of your estate plan. If you have not directed where assets that were meant to go to an ex-spouse, then the court will likely be required to make that determination for you during the probate process. That may result in your assets being distributed in a way contrary to how you would like them to be.
You will also need to update beneficiary forms and titles pursuant to the divorce settlement. Pushing this step off can be a costly mistake, and it can cause significant hardship on a subsequent marriage or beneficiaries in general that may need such assets to pay for the costs associated with a funeral as well as costs associated with administering your estate. If you remarry, you will also need to incorporate changes to your estate plan that reflect goals from your new marriage.