Family law and estate planning often intersect. This is particularly true when contemplating divorce, remarriage, or blending families. Here’s how.
Navigating a divorce is emotionally grueling and can be incredibly time-consuming. That includes sifting through mountains of paperwork to search for financial records and other key documents. Amid this chaos, many overlook the importance of re-evaluating their estate planning documents, either putting it off until after the divorce is finalized or neglecting it altogether.
If this resonates with you, here’s a heads up: Though it’s important to reassess your estate plans after your divorce, there are also certain aspects of your estate plan you should address during the divorce process as quickly as you can get to it to safeguard your assets and interests.
That said, Washington state laws may restrict you from making certain alterations to your estate planning documents until your divorce is official. Nonetheless, you should strategize which changes you may need to make now and then once your divorce concludes. Those changes can include the following.
Power of Attorney
Spouses often grant each other a durable power of attorney, allowing one spouse to manage assets or accounts on behalf of the other. If the grantor becomes incapacitated, the arrangement remains valid if the parties have not yet filed for divorce or legal separation. If you have these documents that name your spouse, you need to update these documents to reflect who you would want to perform this role now that you are divorcing or separating.
If you are embarking on a divorce or are currently embroiled in the divorce process, given the changes to your relationship, it would be wise to revoke any existing powers of attorney as soon as possible. Emotions can be unpredictable during divorce. Therefore, it is best to take this power out of your spouse’s hands to prevent them from potentially abusing it.
Health Care Proxy
A health care proxy (sometimes called a living will) designates someone to make medical decisions on your behalf if you should be unable to do so. Your spouse may have been this person. However, given the circumstances of your impending divorce, you may want to reconsider and also find someone new that you trust to assume the role.
Without a health care proxy, legal proceedings would be needed to appoint a guardian or conservator for you. This could be time-consuming when time is most critical. It could also be costly and result in a choice and decision-making that may not align with your preferences.
Many assets, from wills and trusts to insurance policies, have named beneficiaries, which can include a spouse. As you re-evaluate your estate plan, remember that your ongoing marital status may limit changes you can make to these beneficiary designations, meaning you would have to hold off until after your divorce is finalized.
Guardianship of Children
In the unfortunate event that you pass away before the divorce is official, the guardianship of your children would typically default to your children’s other parent. While you can name an alternate guardian if the other parent isn’t around, parental rights usually supersede such designations. You will want to consider who will control access to any money or assets that you are leaving to your children. You may designate one of your trusted family members or friends to be the trustee to make sure that your children are being provided for financially in the way that you would want for them to be.
Prenuptial and Postnuptial Agreements
Prenuptial or postnuptial agreements can play a crucial role in divorce proceedings if they have been well-crafted. When altering your estate plans, look to see that they align with your prenuptial or postnuptial agreements to avoid potential disputes down the line.
After the Divorce
Once your divorce is finalized, dig deep into your estate plan. This will be the time to make those previously restricted changes and take care that your estate plan aligns with your post-divorce life.
Also, given how circumstances can change, it’s a smart practice to review your estate plan regularly (every three to five years is a good rule of thumb), especially after major life events such as remarriage, births, deaths, or even having a change of heart. Your estate plan should evolve as your life does.
With an uptick in divorce among older couples, colloquially known as gray divorce, remarriage is a subject many couples find themselves contemplating. Yet, many often overlook the need to revise their estate planning in light of it, leading to unintended consequences. Those unwanted outcomes include the following.
Not Safeguarding Your New Partner
To prevent this from occurring, customize your estate plan to ensure both your children and new spouse are provided for.
Neglecting Children from Your First Marriage
Merely leaving assets to your new spouse with the hope they will provide for your children is risky. Consider instead a revocable trust to cater to both your spouse’s and children’s needs.
Another strategy is to create a separate marital trust. Such a trust would enable you to set aside specific funds for your spouse, with the provision that any remaining assets transfer to your children upon your spouse’s death. If estate taxes are a concern, seek the advice of a tax professional.
Risk of Asset Depletion
Assets in a marital trust may be exhausted. This could happen if the surviving spouse needs extended medical care. As a safeguard, consider life insurance as part of your estate plan to support your spouse, allocating other assets directly to your children.
Overlooking Claims from Your Previous Spouse
A divorce decree can prevent your former spouse from inheriting your assets, but it’s crucial to update beneficiary designations on your retirement accounts and any life insurance policies you have from your employer. This ensures your resources don’t unintentionally end up with your ex.
For 401(k) plans, the current spouse is typically the default beneficiary unless the account owner waives this designation. For life insurance and Individual Retirement Accounts (IRAs), the death benefit or asset goes to the named beneficiary. Therefore, if you intend for your children from a previous marriage to inherit these funds, for example, adjust the beneficiary designations to reflect this. For changes to the beneficiary of 401(k)s, your current spouse may need to provide consent.
Blended families are diverse, encompassing a range of relationships, from step-siblings to half-siblings and many more. Just think of the TV show “Modern Family.” As in the show, your blended family is comprised of whoever you wish to include. Given this potential for diversity, estate planning for families requires careful thought.
Depending on when you begin, before or after marriage, your approach to estate planning may vary. Below are some common issues to consider as you begin the estate planning process.
Prenuptial and Postnuptial Agreements
Before marriage, a prenuptial agreement helps clarify estate planning goals. Already married? Not to worry; a postnuptial agreement can help you achieve similar goals. A Seattle family law attorney will be able to assist with both.
As part of your estate planning, you will need to decide who will look after your minor children if you pass away. While marriage may make you think about your new spouse potentially filling this role, other factors can influence this choice, such as the presence of your children’s other parent.
How you distribute your assets among your children is a personal decision. Factors such as age, special needs, or relationships can influence these choices. Depending on your relationship with your spouse’s children, you may want to allocate a portion of your estate to them.
Estate Planning Options for Blended Families
For blended families, certain estate planning methods are more effective in guaranteeing your final desires are respected. While it might not always be possible to bypass the probate process entirely, selecting the right strategy can streamline the procedure.
Suitable for minors, those with special needs, or individuals who need financial oversight, a testamentary trust offers control over who manages inheritances. This is especially useful if relations with the other biological parent are strained.
Although testamentary trusts are part of wills, they come into effect posthumously. This means you can revise them during your lifetime.
Living (Revocable) Trust
Established during the creator’s life, a living (revocable) trust offers flexibility. The grantor can modify beneficiaries, allocate assets, or sell and buy assets in the trust before passing away.
Transfers Outside of a Will Upon Death
Assets can pass between individuals posthumously without being in a will, keeping them out of probate. Common methods include joint tenancies, tenancies in common, or payable-on-death (POD) beneficiary designations.
These designations should remain consistent with your estate plan. Inconsistencies might lead to future disputes within the family.
Find a Seattle family law and estate planning law firm.
Given how many issues involve both family law and estate planning, having a team of attorneys at your side who are skilled and experienced in both areas can save you time and money. At Elise Buie Family Law, our family law attorneys and estate planning attorneys know how quickly small issues can become more involved and, as a result, difficult to understand.
It is just one of the many reasons why we take the time to educate and inform our clients about what is happening and why as their matter progresses. If you would like more guidance on an existing issue or have a new one you would like to discuss and learn more about, call our Seattle office today.