It’s almost Valentine’s Day, and our thoughts turn to reminding those we love how much we care about them. However, sometimes our relationships don’t always go as planned. Either way, it’s important that your estate plan keeps pace with your love life. Here are five ways your estate plan should respond when love is grand, or when love stinks.
1. Show your Love with a Good Estate Plan
Estate planning is about making sure the people you care about will be taken care of if something happens to you. Estate plan documents provide a roadmap for your family, naming decision-makers and people who are in charge of settling your estate following your death, and making sure your assets get to the people you wish to receive them. If you have young beneficiaries or those who can’t properly manage assets for themselves, your estate plan can make sure they are taken care of after your death, naming guardians for minor children, and creating trusts to make sure assets are properly managed and applied for young or immature beneficiaries. Your loved ones will remember you fondly if you leave a well-planned estate.
2. Ensuring Continued Support for Parents or Other Relatives
If you provide support to your parents or other older relatives, planning for their continued support if something happens to you is something you may not consider because you do not expect to predecease them. However, if you do, and if the support you provide is crucial to their well-being, your plan should make provisions for their continued support. An important part of planning for aging relatives is making sure any money left to them is left in trust, in a way that will not impact needs-based public benefits they may be eligible to receive to pay for their care. A trust will also insure that after your older relatives pass away, the remaining funds are distributed to people you choose.
3. When Love Goes Wrong
Unfortunately, relationships are not always all chocolates and roses. For couples in the midst of divorce proceedings, estate planning should be a priority. An important part of estate planning is naming decision-makers in the event you become incapacitated and cannot make legal, financial or health care decisions for yourself. While a divorce is pending, you should consider updating your Power of Attorney (for legal and financial decision-making) and your Health Care Proxy (for health are decision-making), to make sure people you trust will make those decision for you. Chances are your existing Power of Attorney and Health Care Proxy name your spouse as the decision-maker, which may not be the person you want to have that authority under the present circumstances.
If you pass away, your estate plan will determine how your assets are distributed. Because a divorce proceeding, among other things, determines the ownership of a couple’s assets, there are some limitations on this aspect of estate planning while a divorce is pending. During divorce proceedings, an automatic restraining order applies that prohibits either spouse from selling or transferring assets or changing the beneficiary on life insurance and retirement accounts except as permitted by Court order or agreement of the other party. Although asset ownership and beneficiary changes may not be made until after the divorce judgment issues, in the meantime divorcing parties can create updated Wills and Trusts that will distribute their assets as appropriate after their divorce is final, keeping in mind that those instructions may not be effective until the divorce is final.
4. After Your Divorce Is Final
Massachusetts law provides for an automatic modification of an estate plan after divorce, although the result may not be what the divorced person intends. In Massachusetts by law, a divorce judgment revokes any disposition of property to the divorced person’s former spouse, including trust provisions, beneficiary designations as to life insurance and retirement plans, transfer-on-death accounts, and any other revocable disposition. If estate plan documents named the former spouse or family members of the former spouse as a fiduciary – such as a Personal Representative (formerly Executor) or Trustee – those designations are treated as if the former spouse and the former spouse’s relatives predeceased the divorced person. Although these provisions may seem to do the trick, in reality they can wreak havoc on an estate plan and create unintended consequences. In addition, in the event a divorced person intends to or is required by their divorce judgment to benefit their former spouse with life insurance or some other asset, steps must be taken to ensure that designation will stick after the divorce occurs. The law also states that if a financial company is not properly notified of the divorce and it makes a distribution to the former spouse then the company cannot be held liable.
Once a divorce is final, each party should review their existing estate plan and beneficiary designations consistent with the terms of their divorce agreement and with the help of an experienced estate planning attorney and make any changes that may be necessary. For example, for a couple with young children, a Trust may be appropriate to manage a divorced parent’s assets for the benefit of those children if that parent were to pass away during a child’s minority. Naming someone that the parent trusts to manage and apply the Trust assets appropriately for the minor children is of the utmost importance for a single parent. If a Trust is not created, the children’s guardian/conservator will have responsibility for managing any assets inherited by the children, and that person is likely to be the children’s surviving parent. For most divorced couples, the idea that a former spouse will have control over the inheritance left to the children is unsettling and inconsistent with their intentions. An estate plan that addresses divorce-related issues can ensure this does not happen, and that the divorced parent’s wishes will be carried out.
Addressing the continued ownership of real estate that will be retained by one member of a formerly married couple is also important. Although a divorce will sever a tenancy by entirety (the form of joint ownership for married couples) and a divorce agreement or order of the court will determine the title, it is still advisable to have a new deed signed conveying the property into the name of the spouse who is retaining it. No matter how sick and tired you are of dealing with your soon to be ex-spouse, don’t walk away until the i’s are dotted and the t’s’ are crossed and that new deed putting the house in your name is signed and filed with the Registry of Deeds. This will ensure you (and you alone) can sell, mortgage or plan with that property going forward, without the involvement of your ex-spouse.
5. Planning for a New Blended Family
And let’s not forget that many divorced people go on to find love again. Estate planning for blended families is extremely important. Re-marriage brings its own set of estate planning challenges, especially if both parties have children from prior marriages or relationships. In such a case, good estate planning is crucial to ensure that if one member of the new couple dies, his or her children from a prior marriage will be provided for appropriately, while the new spouse or partner is also provided for if they do not have sufficient means of their own. It is unfortunate when, because of poor or neglected planning, all of a parent’s assets pass to the new spouse, who then leaves them to his or her own children or family members at death, leaving the deceased’s children with nothing.
When all is well, planning for death or incapacity may not seem to be a priority which means it can be left on the To Do list forever. When a marriage is ending, there are many things that are a priority, and dealing with multiple attorneys at the same time is not a happy prospect (for most people). But estate planning is an important part of taking care of your loved ones. Whether your situation is simple or complicated, whether your relationships are wonderful or not, taking the time to talk through your situation with an experienced estate planning attorney will provide you with options and strategies to achieve your goals, to protect your family, to give you peace of mind, and allow you to show those you love just how much you care.
Maria Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham. She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), and a past President of the Board of Directors of the Massachusetts Forum of Estate Planning Attorneys. For more information, visit www.ssbllc.com or call (781) 461-1020. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.
© 2023 Samuel, Sayward & Baler LLC