written by Greenberg Traurig, LLP & originally published in AALU Washington Report
MARKET TREND: Divorce rates have been on the rise nationally over the past several years. Accordingly, it should play a larger role in legacy management.
SYNOPSIS: Divorce related legacy planning is critical. Spousal inheritance rights continue to exist until the divorce is final. Merely filing a divorce petition may not terminate provisions for a spouse under existing legacy planning documents or sever survivorship interests in marital or joint tenancy assets. To ensure a client’s assets pass to intended beneficiaries, it is critical that the client amend his legacy plan (or create one) to adapt to the changed circumstances. Although clients have the most leeway to change their plans before proceedings are initiated, there are still actions the client can and should take after proceedings commence.
TAKE AWAYS: Before a divorce petition is filed, clients can execute new wills, amend, revoke, or create and fund revocable and irrevocable trusts, execute new powers of attorney and beneficiary designations, and make other legacy planning changes in anticipation of the divorce. After divorce proceedings begin, clients can still freely execute new wills and powers of attorney, but may need to notify the spouse, obtain the spouse’s consent, or secure a court order before implementing more extensive changes. State laws differ as to what a client is authorized to change and transfers that can be made during a divorce. Clients and their advisors must work closely with divorce counsel to determine the exact planning actions that can and can’t be taken once a petition for divorce is filed.
SYNOPSIS: Divorce related legacy planning is critical. Spousal inheritance rights continue to exist until the divorce is final. Merely filing a divorce petition may not terminate provisions for a spouse under existing legacy planning documents or sever survivorship interests in marital or joint tenancy assets. To ensure a client’s assets pass to intended beneficiaries, it is critical that the client amend his legacy plan (or create one) to adapt to the changed circumstances. Although clients have the most leeway to change their plans before proceedings are initiated, there are still actions the client can and should take after proceedings commence.
TAKE AWAYS: Before a divorce petition is filed, clients can execute new wills, amend, revoke, or create and fund revocable and irrevocable trusts, execute new powers of attorney and beneficiary designations, and make other legacy planning changes in anticipation of the divorce. After divorce proceedings begin, clients can still freely execute new wills and powers of attorney, but may need to notify the spouse, obtain the spouse’s consent, or secure a court order before implementing more extensive changes. State laws differ as to what a client is authorized to change and transfers that can be made during a divorce. Clients and their advisors must work closely with divorce counsel to determine the exact planning actions that can and can’t be taken once a petition for divorce is filed.
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