Every individual has different needs for their estate plan. To ensure that your wishes are accurately reflected and that your children are financially provided for after the divorce, should anything happen to you, it is important to have a few key documents in place and ensure that these documents are reviewed post-divorce.
One of the most important documents to create or update when your divorce proceeding begins is your will. A will outlines who will inherit your assets in the event of your passing, how those assets will be distributed, and who will be named as a guardian for your children, if applicable.
Many individuals going through a divorce with minor children do not have a trust, however, there are many reasons why it is prudent to create a trust after your divorce is finalized. When you and your spouse were married, it is likely that you planned for all of your assets to go to the surviving spouse, should one of you pass away, and for the surviving spouse to use the marital assets and any life insurance proceeds to support the children. When you get divorced, if you wish for your children to inherit your assets, you may consider placing those assets in a trust to ensure that you maintain control over how and when the money is distributed to your children.
Through a trust, you can also set specific conditions on the release of funds. For example, you can require that a certain amount of funds be distributed for your children’s education or that they reach a certain age, like 25 or older, in order to receive a certain amount of money or their full inheritance. A testamentary trust can be created within your will and will come into effect upon your death. You might also choose to create an irrevocable life insurance trust (ILIT), which can hold, manage, and distribute your life insurance proceeds for your child(ren).
It is also important to remember to update your beneficiary designations on your bank accounts, life insurance accounts, and retirement accounts. It is common for newly divorced couples to forget this important to-do item, but if your former spouse is listed as the beneficiary and you forget to update these accounts, the money and proceeds will go to your ex, even if you already revised your will. The beneficiary information on the account will dictate where the money goes. Instead, you could list your children as beneficiaries, a trust to manage the funds, or another close relative.
It is equally important to remember to revoke any power of attorney you may have granted to your former spouse in the past. Whether in the form of a healthcare directive or financial directive, you probably do not want your former spouse to continue to have the power to make major health or financial decisions on your behalf after the dissolution of your marriage.
If you currently share custody of your children with your former spouse, in most cases, if you pass away while your children are still minors, their other parent will be granted full custody. However, in case when the other parent is or becomes unable to care for your children or if they are deemed unfit to parent by the court, it is important to name a guardian in your will as a backup to ensure that your wishes for your child’s guardianship are clear and binding. Your guardianship designations should also align with the court’s custody orders to avoid conflict between the parties and ensure the court will uphold the designation.
While child support obligations typically end upon the death of the paying parent, you can still take steps to ensure that your child is provided for even after your passing. One of the ways you can do this is by setting up a trust with instructions earmarking funds for specific purposes like child support, college tuition, and other needs your child may have.
If your child has special needs, you can set up a special needs trust, which will allow them to receive money for their medical care, education, and other essentials without the money being counted as income that would disqualify them from receiving government benefits.
To complicate matters, if you relocate after going through a divorce or after creating your estate plan, it is important to consult with a lawyer where your will was drafted or your trust was formed and in any new jurisdiction where you acquire property or move to ensure that your guardianship designations and trusts remain valid and effective, and so you can make any necessary updates.
New Jersey no longer imposes a state estate tax and, while there is a federal estate tax, it only applies to an inheritance of $12.92 per individual, making estate tax applicable to very large estates. Still, if you think your estate may be subject to the estate tax or if you move to a state which imposes an estate tax on a lower threshold, it is important to engage in careful estate planning. Putting your assets into a trust and/or making strategic gifts to your loved ones while you are alive can help to lower or avoid the burden of estate taxes.
A family law attorney on our team at Montanari Law Group who has knowledge and experience in estate planning can be extremely valuable during a divorce, particularly when children are involved. During settlement negotiations with your spouse, our skilled lawyers will be able to provide you with valuable counsel on how your decisions during this process may impact your future estate and children and the best strategy for ensuring that your needs now and wishes later on are protected. To request a free consultation and review the details of your case with an attorney who can advise and assist you, please contact us today at (973) 233-4396 . Our firm is dedicated to helping individuals and families with family law concerns and overlapping issues, such as long-term estate considerations, in Wanaque, Caldwell, Essex Fells, Teaneck, Franklin Lakes, Ridgewood, Short Hills, Woodland Park, New Milford, Millburn, Montclair, and throughout the northern region of New Jersey.
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