Estate planning is a multifaceted discipline in that it includes aspects of various specialties, from tax law, insurance, health care, Medicaid, and divorce law. With respect to divorce, estate planning requires a special approach. In addition to dealing with the formal submissions required to receive a divorce, some financial planning is in order.
The first area that needs to be addressed following a divorce is beneficiary designations. This includes employer retirement plans, individual retirement accounts, life insurance, annuities, and health savings accounts. In addition, transfer on death investment accounts, payable on death bank accounts, wills health care powers of attorney and living wills, powers of attorney, and revocable trusts should be reviewed so that the divorce is reflected in them.
Things can get more complicated when it comes to Guardianship, particularly when a custodial parent is unsure if their ex-spouse will want to raise the children or be fit to do so in the event of some tragedy. Custodial parents who are concerned that money left to their children may not be used as they would wish can make use of a trust that ensures funds will go toward specific purposes, that the child’s inheritance is protected. It is wise for divorced individuals to name successor guardians in the event their ex-spouse doesn’t want to or is unable to raise the children.
Some estate planning structures, such as irrevocable life insurance trusts, qualified personal residence trusts, and charitable trusts, may be difficult or impossible to change. For those that can be, the tax advantages may be destroyed if the structure is changed. In working on these matters, it is important to work closely with an estate planning attorney to look at all possible options.
Source: nj.com, “Your Legal Corner: Critical divorce issues, Part II,” Victoria M. Dalton, November 25, 2012