Divorce and estate planning

On Behalf of | Nov 8, 2017 | Firm News, trusts

People in North Carolina who are getting a divorce may want to consider changing their estate plan as well. If a person dies before the divorce is final or shortly after the divorce, the ex- or soon-to-be-ex-spouse could end up with the person’s assets.

For example, one man had a large settlement he had received after an accident. He and his future wife signed a prenuptial agreement under which the settlement would remain the man’s property. The man placed it in a trust, but after being married for several years, he made his wife an 80 percent beneficiary of his trust. His family was the 20 percent beneficiary. However, after a decade, his wife filed for divorce. Changing the trust would have simply been a matter of signing an amendment. However, the man did not do so and died just days before the divorce decree was final. The couple lived in Arizona where the law stipulated that since the decree was not yet final at his death, his wife still received $14.4 million or 80 percent while his family only got about $3.6 million.

Another man did not sign and file a document relating to his and his ex-wife’s retirement plan in a timely fashion. He then died on his honeymoon. As a result, it was necessary to prepare and file new orders.

Some changes to the estate plan might not be permitted until a divorce is final, so a person may want to check with an attorney about what can be changed. One often overlooked form is the beneficiary designation. These forms may be filled out when a person first starts a retirement account or purchases a life insurance policy. Beneficiary designation forms override what is written in a will or trust, so it is important to keep these updated.