When did you first think about your estate plan – was it when a parent or grandparent died, after the birth of a child or during a serious illness? You probably don’t want to deal with lawyers or more legal documents now that you are divorced. However, this is a critically urgent time in your life to make changes to your estate plan.
Your divorce has probably created significant changes in your personal finances and planning objectives. If you don’t make changes, your ex-spouse may inherit from your estate or be in a position to make life and death decisions for you. If you have children, the need to protect and provide for them takes on a new set of challenges after divorce. These and other matters require an update of your estate plan – the sooner the better.
Last Will and Testament
If you don’t update your existing Will, your former spouse may inherit from your estate. If you have minor children, you need to name a guardian for them in your Will. Upon the death of one parent, usually the surviving parent will become the sole guardian. But if your former spouse has also died, had his or her parental rights terminated or becomes an unfit parent, the court would have to appoint a guardian and would appreciate knowing your wishes.
If you have a Will and minor children, your former spouse is likely appointed as Trustee of any trusts created for your children. If you want someone else to serve in that capacity, you must change the terms of your Will.
Health Care Proxies and Living Wills
These medical documents appoint someone to make health care decisions for you if you are unable to make them for yourself. Most married couples appoint each other. But now that you are divorced, you probably don’t want your former spouse to make life and death decisions for you.
Is your former spouse named beneficiary of any asset such as life insurance, IRAs, annuities, health savings account, investment or bank account? If so, those assets will pass directly to him or her. Even in those jurisdictions where the law allows for such designations to expire with divorce, are your minor children named as successor beneficiaries? If so, then a court will appoint a guardian of the property upon your death to manage those assets until the children reach 18. Once the minor reaches 18, he will receive the entire inheritance. This may not be the result you want. It is preferable for that inheritance to be held in a trust with supervised distributions. Your former spouse could be named by the court as guardian of that property until your child reaches 18. Do you want him or her to supervise such assets for your children? If not, changes must be made.
Tax Considerations for a Single Person
In high net worth situations, a divorce can also create estate tax considerations that did not exist prior to the divorce. For example, under current federal law, a married couple can take advantage of both parties’ estate tax exclusions (which effectively doubles the potential tax free transfer to $22.2 million). A single person has $11.1 million exemption. As a result, a single person may need estate tax planning after divorce that was not needed while married. Likewise, New York State imposes an estate tax on estates that exceed $5.25 million ($10.5 million for a married couple).
Other documents that may also need to be reviewed include Revocable and/or Irrevocable Trusts and title(s) to property. After divorce many people simply fail to change title to the assets they’ve been awarded (such as real estate and vehicles) leaving the property in joint title with the former spouses. These jointly held assets may pass upon death to the surviving ex-spouse.
It’s understandable if you’ve had enough of attorneys after your divorce. However, this is one of the most important times to update your estate plan or create one if you’ve never had one.
If you need an experienced estate planning attorney, please call The Law Office of Audra E. Dehan, Esq. at (631) 481-7770.