Provided by the Law Offices of
RICHARD MAYBERRY
MAYBERRY LAW FIRM
2010 Corporate Ridge
McLean, VA 22102
(703)714-1554
Committed to providing the highest quality estate planning legal
services for individuals, families and businesses |
Divorce is common in America. An estimated 50% of first marriages end in
divorce after approximately 11 years. Divorce affects relationships. Each
year about 1 million children will experience the divorce of their
parents. Divorce is expensive. The average divorce takes one year from
initial filing until final decree, costing the parties $15,000. Typically,
both divorcing parties experience a reduction in their standard of living.
Against this backdrop it is no surprise that researchers consistently rank
divorce as one of life’s most stressful experiences. While many effects
of divorce are obvious, others are less obvious, but warrant careful
consideration. In that regard, here are some common pitfalls you may want
to avoid in your Life & Estate Plan following your divorce.
Your
children are your most valuable assets. Absent proof of unfitness, a
surviving parent remains the natural guardian of their minor children.
What if your ex-spouse predeceases you? Have you made proper legal plans
to appoint a successor guardian of your own selection? If not, then a
successor guardian may be appointed to rear your children, either through
the legal plans of your ex-spouse or by a court.
Who will
handle the inheritance you leave your minor children? Unless you have made
proper legal arrangements to appoint a custodian or trustee of your own
selection, then your ex-spouse may be appointed by a court to manage the
inheritance until your children reach the age of majority (e.g. age 18 in
most states). Then, once your children reach the age of majority, the
court will require your ex-spouse to distribute what is left directly to
your children without any strings attached. Once in the hands of
your children, the inheritance may create or attract problems.
Wealth Planning
Few
young adults are mature enough to manage an inheritance. Should you wish
to protect the inheritance for and from your children, then you may want
to consider having the inheritance administered through Testamentary
Trusts. These Trusts can manage and distribute the inheritance according
to your instructions. Additionally, Testamentary Trusts containing special
Spendthrift Provisions may help protect the inheritance from the potential
squandering, divorces, lawsuits and bankruptcies of your children.
Should your children fail to
outlive their inheritance, Testamentary Trusts may even provide for
contingent beneficiaries. This can avoid unintended and unpleasant
consequences. For example, in the absence of careful Testamentary Trust
planning, your ex-spouse may become one of your heirs. Here’s how.
Suppose one of your children survives you and receives their inheritance
outright. If that child then dies, without leaving a spouse or child, then
their next-of-kin would be their surviving parent…your ex-spouse.
To make matters worse, your ex-spouse’s new spouse (and the new
spouse’s children) could enjoy the inheritance upon the death of your
ex-spouse. Accordingly, properly prepared
Testamentary Trusts can provide invaluable inheritance protection for your
children and peace of mind for you.
Another excellent method of unintentionally
enriching your ex-spouse is the failure to review your beneficiary
designations. While married, most spouses designate one another as the
beneficiary of their respective life insurance policies and retirement
plans. However, after your divorce, you should ensure that all beneficiary
designations are updated. Otherwise, your ex-spouse may be entitled to
receive the funds intended to benefit your children or other loved ones.
Health Planning
If you are incapacitated, who will make
your health care decisions? Considerable confusion may result should an
emergency arise and your ex-spouse is appointed as the decision-maker on
your health care directive. Do you really want your ex-spouse making end
of life decisions for you? It is far simpler to revoke an existing
health care directive by executing a new one that appoints family members
or friends to serve in this important role.
Have you considered your potential need for
long-term care in the future? Without a spouse as caregiver, who would
take care of you at home? Would you need to move to an assisted living
facility or to a nursing home? Long-term care insurance is a common method
of funding this risk. Seek expert advice in evaluating your options.
Summary
Proper
post-divorce planning can protect your relationships, wealth and health. A
careful review of your Life & Estate Plan is essential following your
divorce.
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