Estate Planning And Divorce
Many individuals first think about estate planning when they get married. They realize that, at a minimum, they should have a will, general power of attorney and power of attorney for health care. They may later amend these documents due to life changes or changes in their financial position. However, one might be surprised to know that a recent survey by PNC Wealth Management disclosed that 30% of adults with financial assets of $500,000 or more did not have a will! A recent Harris Interactive survey of the general population found that 58% of all adults had no will. One might be even more surprised that if he or she had a will and became divorced, he or she may be no better off than if he or she had no will.
Fortunately, if one is divorced, unless the will specifies otherwise, one’s ex-spouse is deemed to have predeceased the individual; and thus, will not inherit under the individual’s will even if named a beneficiary. The ex-spouse is also deemed to have predeceased the individual for purposes of serving as an executor, trustee or power of attorney. However, what if a couple had simple wills leaving everything to each other with no contingency naming back-up beneficiaries if the spouse is deceased, and named the other spouse as the executor without an alternate? Post-divorce, such a will would be basically useless, and no different than if the individual had no will.
What happens if a divorced person dies without a will? The laws of intestacy in the state where the decedent last resided would apply. If one had no children, all assets would go to one’s parents. If the parents were receiving Medicaid assistance or had limited assets, the funds may eventually all have to be depleted for the parents’ medical or nursing home care. If one had minor children, the assets would have to be placed in a guardianship for the children. Court approval would be required prior to using the funds for the childrens’ needs, and they would have to be distributed to the children at the age of 18. The decedent would also have no control over the choice of the guardian. If one had no children or parents, the assets would be distributed to the decedent’s closest blood relatives.
Usually, these are not the outcomes that the decedent would have wanted. So then, what is a person to do? First, in initially preparing estate planning documents,one should always address in the documents the possibility of his or her spouse predeceasing him or her and how assets should be distributed under such a situation. They should designate an alternate executor; and if they have young children, designate a guardian and alternate guardian. These inclusions would help protect the individual if a later divorce occurs. However, it is just as crucial, if one’s marriage unfortunately ends, to remember to include as a priority item on the “to do” list, a comprehensive review of his or her estate planning documents. This will eliminate the possibility of an undesired and unfortunate distribution of one’s assets upon one’s death.
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