In this episode of Absolute Trust Talk, host Kirsten Howe and associate attorney Jessica Colbert continue their discussion on estate planning during divorce proceedings with practical solutions. Following their previous episode on the potential problems that can arise if someone becomes incapacitated or dies during divorce, they now focus on preventative measures. The attorneys explain how to ensure your soon-to-be ex-spouse doesn’t maintain control over your healthcare decisions or inherit your assets contrary to your wishes. They discuss the creation of new healthcare directives, powers of attorney, wills, and trusts—all while navigating the automatic temporary restraining orders (ATROs) that restrict asset transfers during divorce. This episode, part two of their divorce series, provides clear guidance on proper timing of estate planning updates during divorce to protect yourself legally before the process is finalized.
Time-stamped Show Notes:
0:00 Introduction
2:03 How to avoid having your spouse be responsible for you if incapacitated
2:26 Next, Kirsten and Jessica discuss options for those who have never created estate planning documents
2:48 What should you do if you already have documents naming your spouse?
3:16 Now, let’s talk about how to prevent your spouse from inheriting if you die before the divorce is final
5:23 What are the next steps for clients who already have a joint trust with their spouse?
6:07 Let’s clarify the importance of following trust-specific revocation methods and requirements during divorce
7:44 Finally, listen as Kirsten and Jessica talk about why accepting potential probate may be necessary and worth it
Transcript:
Hello and welcome to Absolute Trust Talk. I am Kirsten Howe, and I’m here with Jessica Colbert, one of our associate attorneys. Today we are going to talk about how to avoid bad estate planning results during a divorce.
We are doing this to educate. We work with a lot of people who are going through a divorce. Still, unfortunately, what we see, at least in our practice, is that they come to us at the end of the divorce, their divorce is just about to be final, and then they decide they’re going to work on their estate plan. We would, I mean, of course, we’re happy to help people whenever they’re ready. We would much rather see people coming at the beginning of the divorce process, because it’s much better result for them, or it’s a much more likely to be a not unfortunate result for them. And that was a big double negative sentence, but I think we’ll see what I’m talking about in a bit.
In our last episode, we talked about the undesirable things that can happen if you become incapacitated or die before your divorce is final. Very generally speaking, the result often is going to be that your soon-to-be ex-spouse would have a lot more power than you would like, and would end up inheriting more than you would like if you die before the divorce is final. Today, we will talk about how we can prevent those things from happening. Of course, we can always prevent those things from happening by not dying or becoming incapacitated, but we don’t have so much control over that. Where I talk about legally, what can we do to prevent that from happening?
Our focus first will be on incapacity. Jessica, what can we do to avoid that unfortunate result, having your spouse be responsible for you if you’re incapacitated before your divorce is final?
So if you haven’t done any estate planning, now is the time to go ahead and do it. And in the case of incapacity, this will make sure that the person that you do want now to make those decisions for you, whether it be medical decisions or your legal and financial decisions, you can execute a new, durable power of attorney and a healthcare directive to name those people that you want making decisions for you.
Right? If you have not done those things prior to filing for divorce, just go ahead and do it, and that way, you ensure that the person you want is the person who will have that power. Now, if you already have a healthcare directive and a power of attorney, you can name your spouse as your agent, but you don’t want that. Now. What do we do?
You can just execute new documents. The language and the documents will make it clear that you are revoking the prior versions, the ones that named your spouse, and will be replaced with the new ones that you’ve prepared, naming someone else.
Okay, alright, so that’s incapacity. We always have to look at incapacity. What about death? How? What can we? What can we help our clients do to prevent their spouse from inheriting if they should die before their divorce is final?
Yes, so if they don’t already have a trust or a will, they can go ahead and create them, there are some restrictions, and they’re called automatic temporary restraining orders, or ATROs for short, and that are that apply to both divorcing parties as soon as the divorce petition is filed and the ATROs prohibit transferring assets, which is what we are always, you know, reminding our clients to do after they set up a trust. You have to transfer assets into the trust, or fund the trust, as we call it. But in this case, while the divorce is pending, you cannot actually transfer the assets. You cannot fund the trust yet. But the ATROs do not prohibit you from setting up the trust, creating the trust, or creating a will itself.
Right, and this way you, by having a will and a trust that you are eventually going to be able to fund once you’re divorced, by having all that in place, you are not going to be dying intestate, and you are instead writing your own estate plan. You’re saying, if I die, this is who I want my children to inherit everything, or I want my siblings, or whoever you want. But not the intestate rule, which would be your spouse. Okay? So we, in our practice, we typically want to go ahead and create the trust at this time, whenever it is that the client comes to us, we’re going to go ahead and create the trust, knowing that we won’t be able to fund it until after the divorce is final, just to save the client the hassle of having to come back again and later on, create a trust. Might as well just do it, because that’s going to be their estate plan. And rather than making them do this in stages, we just go ahead and do it, which helps to avoid probate as quickly as possible.
Now, what we can do to help our client who already has a written estate plan? Jessica, what? What would that entail?
So, same thing, we would have that client create their own separate trust and a will, even though, again, we know that they can’t actually fund it yet, until the divorce is final. But then there’s an additional step when they have a joint trust already with their spouse, which is we would help our client revoke the existing joint trust, at least as to our client’s share of the trust assets and the ATROs that we mentioned a little bit ago, they don’t prohibit revocation. They do, however, require that the revoking party provide a written notice to their spouse letting them know that they have revoked the trust, and we would follow whatever the rules are about how to revoke as provided in the trust.
Yeah, and so, I mean the bottom line, first and foremost, you always have to follow what the Trust says, and most trust documents will say something about this is how you revoke this trust, and if it requires the written authorization of both husband and wife, we’re stuck with that, that’s the only way we can do it. I think that it’s possible to go to the family court and say, We want to revoke this trust. I think that’s another alternative. But, you know, that’s not what we do. We don’t practice in family law court. We stay away from that, so following what the Trust says in terms of revoking the trust so that the assets that eventually belong to our client after the divorce are not held in that trust. They’re not controlled by that trust. We set up a written estate plan for our client, and we revoke the trust, and the other spouse has to be provided with that legally required notice, which we generally leave that to the family law attorney to do, also, because we don’t want to, we don’t want to make a mistake there. Okay, so in both cases, whether there was an estate plan previously or not, because we are not able to transfer assets into the new trust there, there may be a probate if our client dies, and they kind of have to be okay with that.
Yes, that is a risk, but I think that the negative is usually outweighed by the positive of knowing that you’re not leaving all of your assets to your, you know, soon-to-be ex-spouse.
Yeah, yeah. I guess this is one of those very rare instances where we two estate planning attorneys are saying, Go for it. Probate is better than leaving everything to this person that you really don’t want to have anything to do with. You’re never, you’re almost never going to hear us say that. But in this very specific context, probate is okay, Jessica. Anything else you want to add to this?
No, I think that you’ve covered it. We’ve covered it. And just to reiterate, I mentioned last time that Jessica’s getting ready to go out on maternity leave, so this may be the last time that you see her for a little while.
I’ll miss you all.
Thank you, Jessica, and thank you all for joining us. We look forward to connecting with you next time.
Resources Related to This Episode:
- Absolute Trust Talk Ep. 179: Divorce in Progress: Safeguarding Your Estate Plan Before It’s Final (Part 1) https://absolutetrustcounsel.com/179-2/
- Absolute Trust Talk Ep. 134: Character Matters Part 1: Understanding Community Property in Divorce and Estate Planning https://absolutetrustcounsel.com/134-character-matters-part-1-understanding-community-property-in-divorce-and-estate-planning/
- Absolute Trust Talk Ep. 107: What are Commonly Overlooked Money Issues When Splitting Assets in a Divorce? https://absolutetrustcounsel.com/107-what-are-commonly-overlooked-money-issues-when-splitting-assets-in-a-divorce/
- A Will is Not Enough – Securing Your Legacy with Estate Planning Life can change in an instant. A will is not enough to be prepared. Get free access to our actionable E-book Guidebook #1 and start protecting your legacy today. https://absolutetrustcounsel.com/guidebooks/
- Learn how to comfortably define gray areas and assess your unique needs to build a secure future now effortlessly. Check out Guidebook #2, Estate Planning Beyond the Basics, here > https://absolutetrustcounsel.com/guidebooks/
- Get our free introductory guide to the most used estate planning tool, family trusts, and understand how we plan to help protect your family. Guidebook #3: https://absolutetrustcounsel.com/guidebooks/
- Absolute Trust Counsel would love to offer access to our Incapacity Planning resource page: https://AbsoluteTrustCounsel.com/Incapacity-Planning/. We’ve collected our top planning information all in one place so listeners can find videos, guidebooks, blog posts, and a host of information with tips and strategies on implementing, planning, and protecting themselves and their loved ones.
- We’re pleased to provide a library of e-books to address common estate planning questions and concerns in practical, easy-to-understand language. https://AbsoluteTrustCounsel.com/Resources/.
- ASK KIRSTEN: If you’d like Kirsten to answer your question on the air, please email her at Info@AbsoluteTrustCounsel.com.
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