When we first meet with a client, the financial issues that seem most pressing are typically related to alimony, child support, or the marital home. A proper estate plan needs to be part of that conversation
Red Bank, NJ (PRWEB) March 30, 2012
With baby boomer divorce rates on the rise, New Jersey Divorce Advisors, LLC and Estate Attorney Fiona Van Dyck have teamed up to provide essential tips for managing Estate Plans during a divorce.
The divorce rate among baby boomers has doubled in the past 20 years, according to a recent report by the National Center for Family & Marriage Research (NCFMR). In fact, it’s become such a trend that Susan L. Brown, co-director of the NCFMR, named it “The Gray Divorce Revolution.” Divorce has complex legal issues for people of all ages, and such a profound emotional impact that people often overlook the financial ramifications. New Jersey Divorce Advisors, the leading financial experts on divorce in New Jersey, have teamed up with Estate Attorney Fiona Van Dyck to address the necessary steps to protect an estate during divorce.
Baby boomers, in particular, need to make sure they protect their assets by taking the appropriate estate planning steps. Proper financial planning, including estate planning, can protect families from unintended consequences and unnecessary tax liabilities. “When we first meet with a client, the financial issues that seem most pressing are typically related to alimony, child support, or the marital home. A proper estate plan needs to be part of that conversation,” says Bryan Koslow, President of New Jersey Divorce Advisors.
When it comes to Estate Planning, there are four main considerations—a Last Will and Testament (“Will”); Power of Attorney; Healthcare Directives or Living Wills; and Beneficiary Designations. Here are some essential tips for managing these important matters:
Last Will and Testament
A Will is a legal document presented to the court, which sets forth to whom assets should be distributed, the manner in which they will be distributed and when they will be distributed. The Will also names an “executor”—the person charged with gathering the assets and distributing them to beneficiaries as well as paying last expenses.
In most cases, people name their spouse to be the executor and primary beneficiary under the terms of their Will. When the document was drafted, your spouse was the person that you cared for and trusted more than anyone else so he or she was the natural choice to be the executor and primary beneficiary. When a couple divorces, those things often change and listing an ex-spouse in those roles now may not be what’s intended. People may not want their ex to handle their estate and distribute their assets after death. In fact, until the divorce is finalized, if the spouse is the sole beneficiary under the terms of the Will, then the spouse will be left all of the assets in the estate. Obviously, this is not ideal if the marriage is soon to be over.
“The current Federal Estate Tax laws give married taxpayers the ability to pass an unlimited amount of money to their spouse upon their death,” says Jodi Carter, CPA, Chief Operating Officer of New Jersey Divorce Advisors. “Divorced individuals lose that benefit and need to utilize other estate planning techniques to protect their wealth.”
Consider this scenario- a spouse dies before the divorce is finalized leaving the living spouse as the sole beneficiary of the estate. If the couple had children together, the surviving spouse may or may not continue to use the money for the benefit of the children. Even if the spouse is a good parent with the best of intentions regarding the children, if the surviving spouse remarries and dies, either without a Will or with a Will that provides only for the second spouse, the children will not be entitled to the full benefit of the assets that were left behind. In either event, the children will be entitled to only a portion of the spouse’s estate. The new spouse, and his or her children, could end up as the ultimate beneficiaries of the estate. This is a role that should be filled by someone that can be trusted implicitly, so make this change now.
When a written Will does not exist, then the law provides for the spouse, whether divorcing or not. It is the estranged spouse who will be recognized by the courts as being entitled to control the estate. It will be the soon to be ex-spouse who will be entitled to at least half of the estate if the couple has children, and all of the estate if there are no children. Having an estate plan drafted will put control into the hands of the estate owners rather than state intestacy laws.
Powers of Attorney
A Power of Attorney authorizes the named person to act as an agent to manage financial affairs should a person become unable to manage them independently.
When an estate plan is put in place during the course of marriage, it almost invariably names the spouse to be the person to make both financial and health care decisions on behalf of the incapable spouse. Having an ex-spouse in the role as financial agent under a power of attorney or health care agent under a Living Will can be downright dangerous. A durable power of attorney is often very generally written to allow the appointed person to handle any financial matter that may occur. When that person is a trusted person, who has best interests at heart, then this is appropriate. That broad power, however, means that funds can be removed from bank accounts, from brokerage accounts, and it even means that real estate deeds can be signed on another’s behalf. These are not the powers that should be given someone involved in a contentious relationship. Now is the time to change this paperwork as well.
Healthcare Directives & Living Wills
Health Care Directive/Living Will—A Health Care Directive allows a person to name someone to make medical decisions on their behalf when they cannot. A Living Will informs doctors of end-of-life medical wishes and allows that person to interpret medical wishes if necessary.
What this means is that if a spouse was originally named in the directive and Living Will, then that spouse now has the power of life or death. If critically ill, and unable to make decisions about which medical course should be taken, the physicians will turn to the ex-spouse to make the decision.
Again, while this made perfect sense while the marriage was intact, it makes no sense now. Emotions run high during the divorce process and abuses with regard to these documents can occur. It is imperative that they, like your power of attorney, be revoked and new documents put in place to protect the wishes of the estate owner.
Beneficiary Designations on Life Insurance Policies & Retirement Accounts
Along with drafting a new estate plan, it is imperative that beneficiary designations are reviewed as well. Chances are good that a spouse is listed as the primary beneficiary on both life insurance policies and retirement accounts. That means they are listed to take the entire death benefit of the life insurance policy or to become the sole owner of the retirement account upon the account owner’s death.
Estate plans and a Will do not control who receives the death benefit from insurance policies or who inherits retirement accounts. Rather, it is the person designated as the beneficiary of the policy or the account that has the sole control over who receives the money.
Meeting with an experienced estate-planning attorney, and financial advisor is something that should be done as a matter of course when divorcing. The estate-planning attorney will be able to provide all options in moving forward, and make certain that the estate owner’s wishes will be carried out should he or she die. The attention given to the estate plan during and after divorce deserves the same attention that given to reaching an equitable settlement.. Unfortunately, the unthinkable can happen, and if it does, the forethought that’s been given to the estate plan can stop a bad situation from becoming worse.
Fiona Van Dyck, Esq. is a Princeton-based Estate Attorney. Fiona Van Dyck has over 20 years of experience practicing law in a variety of diverse settings, including four years as a partner in the Princeton firm of Bryant Van Dyck LLC. As the founding attorney of Van Dyck Law, she dedicates her practice to assisting individuals and families in formulating estate plans, protecting the interests of a disabled or elderly family member, probating the Will of a deceased love one, or planning a business.
New Jersey Divorce Advisors, LLC is a divorce consulting and planning firm committed to providing comfort to divorcing individuals and their families during each phase of the divorce process. By connecting divorcees with the appropriate professional resources, the firm is able to streamline the divorce process and improve the likelihood of an equitable divorce settlement. The firm’s advisors are experts in their respective fields and collaborate to provide clients with a complete divorce roadmap. The firm may be utilized in Divorce Mediation, Litigation, or Collaborative Divorce.