If you are going through a divorce, you may be overwhelmed by the number of life-changing decisions you must make before you can move on. Unfortunately, the day-to-day decisions often push the estate planning consequences of separation further down the road, causing havoc if a former spouse suffers incapacity or death. Whether you have already created a will or have not yet begun the estate planning process, it is critical to understand the impact that divorce will have on your estate.
Estate Planning Considerations for Divorcing Spouses
If at all possible, it is best to maintain an open and collaborative relationship with your spouse throughout the divorce. Not only will this lessen the negative impacts of separation for children and family members, but it is also more likely to result in a settlement that meets your specific goals and needs for the future. If the mood becomes contentious, you could both spend years in litigation, spend your assets on court costs, and ultimately have a judge make all the important decisions for both of you.
An amicable divorce also allows you to craft an estate plan that can be updated as your spouse’s or children’s needs change. Beneficiary designations and other important factors can differ greatly based on where you are in the separation process, your relationship with your ex-spouse’s family members, and how property has been split between you and your spouse.
If you have already filed for divorce, you should know that dissolution of marriage may result in:
- An ex-spouse making medical decisions for you. If you do not update the health care directives in your will, your former spouse may have the authority to make decisions about your care (including life support and hospice care) if you were to become incapacitated. Although the filing of divorce creates a temporary restraining order on your assets and estate planning documents, the law allows you to create a temporary will covering your wishes and property while your divorce is in process. Your divorce lawyer can advise you on which actions to take, and our firm can ensure these temporary documents are properly prepared, signed, and executed. Once your divorce is final, you may wish to revoke existing powers of attorney that would give an ex-spouse control over your assets and your medical care.
- Tax concerns. The way you and your spouse split property can have an enormous impact on each spouse’s tax liability. Couples in the midst of a divorce may not know which parent has the right to claim deductions for children, whether they should file jointly or separately, and how to claim jointly held assets (such as a house) going forward. Our law firm will consider the tax implications of property division choices so that your decisions do not create an unnecessary tax burden.
- Paying alimony. Alimony, also known as spousal support, may be paid to a non-income earning spouse during and after divorce. If you have been ordered to pay alimony, you can do so monthly for a predetermined period of time or make a one-time, lump-sum alimony payment. If you choose monthly, you should consider insurance options to guarantee that alimony payments continue in the event of your incapacity or death. You should also account for these payments in your estate planning documents.
- Receiving alimony. If you have received alimony in a lump-sum cash payment or through disproportionate property division, your net worth could be considerably higher than it was before the divorce. It is important to update your estate plan to include any new assets titled in your own name and to discuss trust planning options to ensure those assets are passed down to the right people upon your passing.
Let Us Advise You During This Stressful Time
At Yolofsky Law, we don’t just draft documents. We help you make informed and empowered decisions about life and death, both for yourself and the people you love. As your Personal Family Lawyer®, we can guide you in creating a comprehensive financial plan that protects and preserves your wealth while meeting all your financial obligations. Give us a call today to discuss your options.