THINK OF ESTATE PLANNING DURING DIVORCE
Nov. 8, 2017
California residents have a lot on their mind when going through a divorce. Most people probably are not thinking about estate planning. However, divorcing spouses may need to update their existing wills, trusts, retirement beneficiaries and end-of-life documentation.
A trust and trust administration professional shared a few estate planning and divorce horror stories. In one story, a spouse was injured in an accident. He received a settlement before the marriage and put the money in a trust. This money was his separate property, but he eventually added his wife as an 80 percent beneficiary of the trust. The couple was married for 10 years when they decided to get a divorce.
The husband got sick and died before the divorce filing, which meant he was still technically married when he passed away. The wife inherited the majority of the trust, which was around $14.4 million. Other family received around $3.6 million. Signing a trust amendment could have ensured that the man's family received the full trust instead.
While this is an extreme example, it shows that unexpected events can happen to anyone. This is one reason estate planning exists in the first place, but many people forget about estate planning documents once they are finalized. Life changes mean that revision may be necessary. This is not just the case when someone dies as a spouse typically has the power to make decisions if a person becomes incapacitated. This means a power of attorney could be needed when divorcing.
People going through a divorce may wish to speak with an attorney when making estate planning decisions. This is especially true when also going through a divorce as both divorce and estate planning laws can be complicated. For example, one could make a trust for separate property when going through a divorce, but the marital property is subject to property division.