Estate Planning Facts and Tips
Elements of an Estate Plan
An estate plan includes a will, a power of attorney, and a living will or health care proxy (a medical power of attorney). In some cases, it may also make sense to include a trust.
A Bad Time to Die
If one spouse dies while a divorce or dissolution of marriage is in process, but not yet final, the other spouse will inherit under the will. Once the divorce is final, gifts to an ex-spouse in a will are no longer valid unless the will specifically says the gifts should be valid, even in the event of divorce. An ex-spouse can inherit, but the intent to provide for the ex-spouse must be clearly stated in the will.
Don't Just Rip Up the Wills
In the event of a divorce, some former spouses imagine they can do estate planning by simply ripping up their old wills. Just ripping up the old will leave them intestate. When a person dies without a last will, his or her property is divided under the laws intestate succession of the state of residence. These laws generally favor the surviving spouse, children and grandchildren, and then move back to grandparents and siblings. Dying intestate slows the distribution of property to heirs.
Death is Not Optional
Death comes to everyone. Making a will is an understandably easy decision to postpone because most people do not like thinking about their own mortality. A failure to do so, however, can cost loved ones money (in taxes that can be avoided). And at the least, property distribution under the laws of intestacy slows the settlement of an estate. For most couples, a mirror-image will (all to him from her, all to her from him) is easy and inexpensive. A young couple with children should always remember that both of them could die at the same time in an accident. Most lawyers recommend the election of primary, secondary and tertiary beneficiaries.
Following a divorce, the beneficiary designations for the following financial instruments should be amended unless the client chooses to leave everything to his/her ex-spouse: 1) Employer retirement plans, individual retirement accounts (IRAs, life insurance, annuities, health savings accounts; 2) Transfer on Death (TOD) investment accounts; 3) Payable on Death (POD) bank accounts; 4) wills; 5) health care powers of attorney and living wills; 6) powers of attorney; 7) revocable trusts; 8) advanced estate planning structures such as irrevocable trusts.
Elective Share Statute
In doing estate planning in the light of divorce, a spouse should remember that most states have what is called an “elective share statute.” This statute provides that his or her spouse (whether estranged or not) remains entitled to a certain percentage of the estate. However, there are a number of ways to avoid or limit the assets subject to the elective share, and to make certain that the estranged spouse does not receive more of the estate than the client wants him or her to, if proper planning is done.
Estate planning requires detailed financial information. This means spouses’ assets and liabilities. On the asset side this includes, but is not necessarily limited to, the following: checking and savings accounts, mutual funds and money market accounts, real estate records, including the marital home, second homes, and unimproved land, personal property such as automobiles, furnishings, and collections (art, stamp, coin), stocks, bonds, annuities, and retirement plans, including pensions and profit sharing, accrued vacation, medical savings accounts, other valuable personal property, life insurance, and season tickets. On the debt side, this includes, but is not necessarily limited to, records of credit cards, vehicle loans, mortgages and home equity loans, promissory notes, student loans and other debt. Put another way, divorcing spouses need all the financial information that they would have used if instead of divorcing, they were going to a financial planner to plan their golden years.
A living will – sometimes called a medical power of attorney – is part of comprehensive estate planning. A living will permits a person to control how he or she wishes to be treated in the event of an incapacitating illness or accident. Normally, spouses make living wills that give each other medical power of attorney.
Power of Attorney
Power of attorney gives another person the right to act on behalf of someone else. This instrument permits one spouse to sign for the other, and it is normally coupled with a living will.
All good estate planning, both before and after divorce, permits some to legitimately avoid paying unnecessary taxes. For example, good estate planning may mean selling the marital home before the divorce of a married couple to take advantage of the $500,000 capital gains exclusion on the sale of a primary residence. If a single person sells the house after the divorce, the exclusion is $250,000.
Resources & Tools
DYING INTESTATE -- When a person dies without a last will, his or her property is divided under the laws intestate succession of the state of residence. These laws generally favor the surviving spouse, children and grandchildren, and then move back to grandparents and siblings.
Easily Connect With a Lawyer or Mediator
Have Divorce Professionals from Your Area Contact You!
Fair Share Divorce for Women
Life Insurance and Divorce
|Your Right to Child Custody, Visitation & Support
Cover Price: $
Your Price: $17.95
You Save: $7.00
"A Plain English Guide to Protecting Your Children"
Author: Mary L. Boland, Attorney at Law
|The information contained on this page is not to be considered legal advice. This website is not a substitute for a lawyer and a lawyer should always be consulted in regards to any legal matters. Divorce Source, Inc. is also not a referral service and does not endorse or recommend any third party individuals, companies, and/or services. Divorce Source, Inc. has made no judgment as to the qualifications, expertise or credentials of any participating professionals. Read our Terms & Conditions.|