How a Divorce Can Affect Your Estate

When people get married, divorce is never really on their mind but, unfortunately, life happens. It is as important to prepare for the worst-case scenario as it is to prepare for the best, and that means having plans set in place and understanding your rights and responsibilities. Marriage changes things, and it can complicate decisions that, at first glance, seem simple.

The simplest point that one should be aware of is their assets – which assets were yours before marriage and which assets were yours after marriage. The latter are marital assets and are harder to separate in a divorce. Long-term marriages complicate details further, such as when separate assets are marital assets mingle with one another, muddying the waters. This can become further confusing when gifts are considered – as they are known as separate assets even if incurred after marriage.

Marital property aren’t simply cars and houses, they are those things that we don’t even think about – such as pension plans, life insurance, and even businesses. These things are difficult to disentangle and vary from state to state. A pension plan can be split between a first spouse and a second spouse, go to only the former or only the latter, all depending on which state you live in. There are numerous details that can be protected by a trust, but marriage and divorce can complicate these further.

While written consent can be used to disinherit a spouse, that is not a guaranteed protection. If a marriage ends on good terms, and one or both spouses remarry, other issues can crop up when children are involved. A trust can be the answer in this case, too, as it can be written in that one’s children are not disinherited by an earlier or later spouse. A divorce is not always going to automatically disallow a former spouse from interfering in the handling of your estate, so it is important to know and understand the laws of the states that affect your property.

The easiest way to avoid pitfalls before divorce are prenuptials and postnuptial agreements, which are legally binding documents that stipulate how an estate is handled in the event of divorce, disability, or even death. These two types of legal protections are great, but they provide an unforeseen pitfall, much like wills. When drafting a trust, it is imperative that they not be contradicted in any manner by a previously written document or one that is written afterward. Contradictions can, and often will, lead to the contention of any trust that is not properly updated or reflective of one’s assets at the time of death. A properly drafted trust protects an estate from even the most ferocious of legal arguments. Your estate is important and it should be handled with care, even if your marriage cannot.

What is a Trustee and Why Do I Need One For My Estate?

A trustee is the person who controls your trust, and it does not have to be somebody else, and at any given time you can change who your trustee is. The job of a trustee is to execute the instructions of a trust, to the letter, that is laid out by you. While you can name yourself to be your own trustee, it can also be a spouse, an adult child, a trusted friend, or even a professional. However, it is a decision that cannot be made lightly. The term is trustee because it is a trusted person who is executing your wishes and desires, so it is imperative that the person chosen to be a trusted person – one who will do as the trust instructs.

The trustee, whoever they may be, will do all of the same things that you do now regarding your finances – collect an income, pay your bills, pay taxes, and save for the future. This is why many choose themselves to be their own trustee, so that they can retain full control of their finances. With another acting as your trustee, though, you do not relinquish control over your financial assets, or any other assets included in the trust, which can alleviate many concerns while also protecting your trust for when you do pass. A professional is suggested for those who do not have a child, another trusted individual, or the time to handle the maintenance of their trust themselves. Others choose a professional or corporate trustee for their experience.

There are some things that a trustee cannot do, though, if there is only a living trust and not a living will. The trust does not allow for the control of medical decisions, which are important when the testator is incapacitated or any reason. If you want your trustee to also be able to make certain medical decisions for you, a living will must also exist – one that does not contradict or invalidate the trust in any manner, so as to protect the integrity of the trust. For the ability to make all medical decisions, you’ll need to give them health care power of attorney. It also has no effect on your income taxes, as the assets are still, in effect, in your name because it is revocable at any time. The limits and exceptions are details that are important to keep in mind when considering who you want to be your trustee.

The trust exists so that your desires can be met in as orderly a fashion as is possible, with as little interference from outside forces as possible. The reason a trustee exists is to carry out the trust’s instructions and if they fail to do so while the testator is alive or there is simply a change of heart, they can be removed from the position. It is all up to you who your put your trust in. Whether it is a friend, or a professionally unbiased party, is at your discretion.

The Dispensation of Your Estate

Too many people don’t plan for the future for after they are gone. This is a mistake, especially if there are assets that you want to be divvied up among any children you have, other family members, or friends. Without some kind of estate plan in place, things can go awry quite quickly. One of the fastest, yet ironically slowest methods, it can go awry is if there is no legal protection set in place in the first place – this can cause your estate to become entangled in probate court. Probate is a process that can last a handful of months to a handful of years, and it is all paid for by your heirs/beneficiaries. This is before they are even capable of accessing whatever assets you intend on leaving to them. This is the worst that can happen to your estate after you die and, if it is especially damaging, it can deplete your estate completely.

If you set up a trust and a will that do not contradict one another, then your estate can be settled relatively quickly and without many hiccups. So, in essence, what happens to a person’s estate after they die is entirely up to them. Assets that are transferable upon death are all but entirely effortless, but those assets that require special legal protections are what should be carefully seen to. If you have any money that you want to leave to your family, how that is divvied up between beneficiaries is entirely at your discretion. If you have heirlooms that you want to see go to a specific person, it is written down so that there is no question and no squabbling after you have passed. There is very little of your estate that cannot be handled by a living trust – a trust that is revocable at any time that you decide to do so.

Part of the reason planning is so important is because there is always a plan in place for your estate after you die, but not necessarily one that you or your beneficiaries will like or enjoy. In the event that a person passes without a legal document explaining their wishes, the state will decide for them – and not always in the interests of your family. Decisions that seem innocuous now can have damaging effects later – if you have minor children and neither you nor your spouse is there to care for them, the state will appoint a guardian to oversee them and their assets, with complete control over how they are taken care of. If you are simply incapacitated and your state does not mandate a family member to oversee medical decisions, a conservator will be appointed to do so for you. These are decisions that can, and should, be made by you before it can become a costly legal battle for your family.

Nobody likes to think about their death, but it is important to plan for you and your family for when it happens before it happens. Your estate is yours to control, and what happens to it after you die is entirely up to you.