Separation allows for the end of accumulation of community property, so each spouse can acquire property separately. However, it does not terminate the duty of highest good faith and fair dealing that every person owes to their spouse. This applies to all marital assets of whatever general character. However, there are several tools an estate planner can use as a means to protect a spouses property while making sure they do not violate their fiduciary duties.
A Temporary or Conditional Will
This type of will is a sound idea, it can either change an existing will or republish an existing will due to a section that revokes an existing will on dissolving a marriage, unless the will provides otherwise.
A postnuptial agreement is a written agreement executed after a couple gets married, or have entered into a civil union, to settle the couple’s affairs and assets in the event of a separation or divorce.
Creation of a Separate Property Trust
Separate trusts hold each spouse’s separate property estate. This includes property received as a gift or an inheritance, obtained before the marriage, and property purchased with those assets.
During Divorce Proceedings
During divorce proceedings it is good to get standard or automatic temporary restraining orders. These orders preclude transfers, or disposal of community or separate property without the written consent of the other party or from a court of law.
However, it is key to note there are certain changes that a spouse can make despite the restraining orders. A spouse may create, modify or revoke a will; revoke a living trust as long as the notice of change is filed and served on the other party; eliminate a right of survivorship to property; and create an unfunded revocable or irrevocable trust.
When a person is in the process of divorce he or she needs to consider revoking and creating a new will as soon as one files the petition for divorce. He or she also needs to consider trusts, joint tenancies, and payable-on-death accounts. One other option a party has during a divorce is to create an unfunded trust. This serves as a recipient for property subsequently received that is subject to pour over provisions in a new will.
After the Dissolution of the Marriage
The entry of a marriage dissolution judgment automatically revokes all testamentary distributions regarding the former spouse. Although a newly divorced person may feel secure in their knowledge that the dissolution will ensure that the former spouse will be disinherited in an existing trust or will, the judgment also can create concerns in a person’s estate plan. For example one should revise all beneficiary designations in retirement plans (IRAs, Roth, SEPs, 401k, etc.) and life insurance.
An estate planning attorney can help newly divorced spouses create all the appropriate documents such as a new revocable separate property living trust, pour over will, trust transfer deed, if needed, assignment of assets, power of attorney, and advance healthcare directives. By doing this, the newly divorced person will now have provided for a current estate plan, post marriage.
In addition, if the newly divorced spouse has a new spouse or domestic partner in the wings, it is a perfect time for them to seriously consider the preparation of a premarital agreement. This agreement will preserve the separate character or their assets, determine the character of new earnings, and handle matters such as spousal support and succession to property on death. It also may be important for the person to consider provisions in the living trust for the new mate.
Preparing for the complexities surrounding the intersection of divorce, death and disposition of property are essential and necessary to enable an estate plan to remain effective. If you are considering divorce, or are recently divorced, you should seek advice from an attorney knowledgeable in these issues. It is imperative that you address these matters especially changing beneficiaries on various investments, retirements plans, and insurance policies.