Divorce is both emotionally and financially stressful. Making tough decisions while your life is changing completely isn’t easy. But one of the tasks you should be sure to remember to do during this complex process is to update your estate plan.
What is an Estate Plan?
An estate plan is a plan of what will happen to your property and assets after you pass on. It can include distributing wealth to your beneficiaries, planning for health objectives, deciding guardianship rights, and even laying out your burial wishes. Without a proper estate plan in place, your assets will go into probate upon your death and could be tied up in the courts for years or distributed to parties that you wouldn’t want them to go to.
What Happens to Your Estate Plan Upon Divorce?
When you go through a divorce your marital assets are typically divided up between the two parties. While these are often divided evenly, they don’t have to be. They just have to be divided “fairly” according to the courts.
What Can Be Divided?
Marital assets typically include any money, property, life insurance policies, vehicles, lottery winnings, etc that were received or earned while the couple was married. Separate property is property that one of the individuals received prior to marriage, personal injury awards to one partner, gifts or inheritance given specifically to one partner, or other property agreed upon in writing. While all marital assets are subject to scrutiny in divorce proceedings, separate property is not divided up upon divorce.
What Happens with My Will or Trust?
Because estate plans are typically complex and specific to the individual, how they’re affected by divorce differs. It can also depend on the state you live in. In California, for example, a dissolution of a marriage automatically revokes any gifts designated to go to your former spouse in your Will, unless otherwise explicitly stated.
But to be sure, if you’re going through a divorce, you want to immediately amend your will to ensure that your ex spouse is not the executor of your will or the trustee of your trust. You may also want to consider updating guardianship guidelines if you do not want your former partner to become your children’s guardian upon your death. Furthermore, look into who you have assigned Power of Attorney to in your life insurance policies, retirement accounts, and in medical situations. You may not want your ex to have total control over what happens to you if you fall seriously ill or need life support.
If your estate plan includes a revocable trust, the assets involved in the trust may be considered marital property and can be subject to division. If your estate plan includes an irrevocable trust, however, your property is considered owned and controlled by a third party and therefore cannot be divided upon the divorce. However, if your former spouse is named as a beneficiary or guardian in that irrevocable trust, you cannot change those terms as the trust is irrevocable. (There are some ways around this and a good estate planning attorney can help you delve into the options available for your circumstances.)
There is a way to prevent some of your assets from being diivied up in divorce proceedings and that’s what’s known as an Offshore Asset Protection Trust which holds your assets in an international LLC. This is a strong way to protect your wealth from being seized and divided by the U.S. court system.
Do I Need an Attorney to Change My Estate Plan?
An estate planning attorney can help you navigate the legal process for updating your will, trust, and other estate planning documents. Without one, there are some tasks you can do yourself, but you may miss key parts of your obligations and end up in legal trouble. These documents are complex and very specific so it’s best to contact a professional, even for the few instances where one is not legally required.
At the Law Office of Kris Mukherji, our experienced lawyers are well-versed in the many laws surrounding estate planning and the wide variety of options available for asset protection. We will take a close look at the contractual agreements involved in your specific situation as well as your personal objectives and help you figure out the best path forward. Divorce is never easy, but our team will work with you to help ensure your assets are protected through this difficult time and your estate plan is prepared with your needs in mind.