As some of our readers have experienced firsthand, divorce can have an impact on how one approaches estate planning. Conversely, the way one constructs one’s estate plan can impact divorce. One of the ways it can do this is in the area of property distribution. For example, the way one leaves wealth to children can impact how property division is determined in the event a child gets divorced.
It can be assumed that many people would change their estate planning approach if they knew their children were going to get divorced. Many people, after all, want their wealth to benefit their children, not their children’s ex-spouse and their family.
In New Jersey, property acquired during the marriage by either party as a gift, devise or by intestate succession will not be considered for purposes of property division in a divorce. There are still some cases, though, where gifts, devises, or bequests can result in a reduction or increase-whatever the case may be-of alimony payments. Child support may represent a similar situation.
One way to build protection into one’s estate plan in this area is to place assets into a testamentary trust. This can preserve the inheritance as premarital and ensure alimony or child support payments are made. Either way, there is a better chance the money will stay in the family.
In this approach, one would leave a minimal dollar amount for the divorced child to receive from the trust. This will avoid a change in circumstances that would alter alimony or child support payments. The trustee should not, in this approach, be given authority to modify trust payments.
Estate planning can be a complicated matter, and care is needed for achieving precise goals. It is best to work with an experienced attorney to ensure your estate planning goals are met.
Source: nj.com, “Your Legal Corner: Trusts and divorce,” Victoria M. Dalton, March 4, 2012.