The divorce rate in the United States is approximately 50%. The “gray” divorce rate – among persons age 50 and over — has doubled between 1990 and 2010, according to a recent Bowling Green University study.
If you are middle aged or above, married and are contemplating a divorce or are currently embroiled in divorce proceedings, here are some suggestions as to what you can do with your current estate plan prepared for you and your spouse.
One of the first steps is to immediately consult with your experienced estate planning attorney to review your documents. One reason for that is, in a divorce proceeding in California, certain restrictions or temporary retraining orders come into effect. For example, neither spouse can sell property or change the beneficiary on a life insurance policy until there is a court order or a finalized divorce. A family law or estate planning attorney can guide you through these automatic restraining order guidelines (ATROs).
For most married couples, a spouse is named as the primary agent, executor and trustee for estate planning documents. If this is the case, you should change your will by creating a new one that revokes the old one. If you have minor children, you should include some language in a new will about a guardian. Of course, if something happened to you, then the other parent would become the guardian but at least you can put in some language regarding a situation if the other parent is later deceased before the children become adults.
Your power of attorney for finances and advance health care directive should be revoked if your spouse is the designated agent. A person you trust completely should be named your new agent. If you have a revocable living trust with your spouse, you should review the terms in the anticipation of making a new trust for yourself as a single person.
In California there is an intersection of estate planning and family law that takes place if you have a trust because California is a community property state. Everything acquired by a married couple from date of marriage to date of separation is jointly owned.
Community property (such as the marital residence) may have to be sold and divided which means real property may no longer be an asset of yours. At the same time, community property financial accounts may be divided. Generally, each spouse’s separate property remains separate. At some point nearing the end of the dissolution process, a person will know their new asset and financial status.
It is wise to sort out community property issues with an experienced family law attorney as well as an experienced estate planning attorney as soon as you know what your revised assets may be. When you make a new estate plan, you can re-establish your beneficiaries such as your children and/or other loved ones.
If you have established Transfer on Death (TOD) or Payable on Death (POD) accounts on financial instruments and have named your spouse on these accounts, you should change them at the proper time. Sometimes, in the angst of a divorce, this is neglected and an ex-spouse may inherit when this was not the intent. The same applies to insurance policies later on and any other instruments that have a named beneficiary. You can decide if you want to name someone else or your new trust as a beneficiary of these proceeds.
Taxes are another consideration. A divorce will alter that scenario. A married couple has an estate tax exemption of approximately $10.8 million while a single person’s exemption is approximately $5.4 million. Depending on your situation, a tax expert should be consulted if your financial status changes.
Divorce is a difficult situation that can also involve spousal support, child support and other new obligations. It will not only affect your current financial status but your estate planning goals as well. If you are in this situation, it is wise to discuss it with an experienced professional.