If you are planning to get a divorce, one thing you might overlook is your estate plan. It's essential to update your estate planning documents when you divorce to prevent unintended consequences from happening. Even if you are filing for divorce in NJ based upon irreconcilable differences and believe your divorce will be amicable, it's essential to consider your estate plan. Once you file for divorce, specific rules related to your beneficiaries will go into effect.
If you haven't created an estate plan, there will not be any provisions about who will inherit your assets or serve as the guardian for your children if something happens to you. Instead, the probate court will follow New Jersey's intestacy laws, which might mean your property will be passed in a way you didn't intend. A divorce lawyer in New Jersey at Ziegler Law Group, LLC, who is also familiar with estate and probate laws, can help you avoid issues that might otherwise occur by updating your estate plan to reflect your change in circumstances.
- Update your estate plan when getting divorced to prevent issues like accidental disinheritance.
- Review beneficiaries on accounts and insurance policies and change if needed.
- Consider setting up a trust to protect assets and provide for children.
- Don't name minor children as direct beneficiaries.
- Work with an estate planning attorney familiar with divorce laws.
Understanding New Jersey's Intestacy Law
If you die without a will, your estate will be handled by the probate court. Instead of your assets being distributed according to your wishes, they will instead pass according to the state's intestacy statute. If you are married when you die, all of your assets will go to your spouse. If you are unmarried, your assets will go to your surviving children. This can be an issue if you remarry and have children from your previous marriage. Failing to create an estate plan could mean that your children from your previous marriage will be left out and accidentally disinherited.
If you do have an estate plan, you should carefully review it when you get divorced. This includes reviewing and updating your will, power of attorney, advanced healthcare directive, trust, and other documents included in your estate plan. You'll also need to review the beneficiaries on your retirement accounts, life insurance policies, bank accounts, and others.
If you fail to update your beneficiaries and your estate planning documents, your ex-spouse could have the power to make decisions for your financial and medical needs if you are incapacitated in an accident or by an illness. Your former spouse could also inherit the proceeds of your life insurance and your retirement account if they are named as the beneficiary.
Trust Accounts and Divorce
You might consider setting up a trust account when you're planning to divorce. Additionally, you might think establishing a trust will protect your assets from being divided with your spouse. Are assets in a trust protected from divorce? It depends on how you establish and fund the trust. If you use marital assets to fund the trust, the court can reach in and force you to divide the proceeds. However, if you fund a trust with your separate property, it can help to prevent your assets from being commingled with marital funds and protect them.
Establishing a trust for the benefit of your children might be a good idea when you are getting divorced. You and your spouse can agree to establish a trust to provide for your children's future educational and medical needs. While your children are minors, a trustee can handle paying for their needs out of the trust. You don't want to provide direct inheritances for minor children, and setting up a trust can be a good way to ensure their needs are met.
You might be tempted to replace your spouse as the beneficiary of your will with an adult child. However, there might be some reasons why providing a direct inheritance to an adult child might not be a good idea. For example, if your adult child is married and receives a direct inheritance when you pass away, there is the potential for the inheritance to become commingled with their marital assets. For example, if your adult child deposits the proceeds in a joint account, his or her spouse could receive half of the inheritance during their own divorce property division.
A direct inheritance for an adult child can also be accessed by creditors. For example, if your adult child has substantial debts or gets sued, the money inherited from you could be reached by creditors.
Establishing a trust can help to avoid these issues. When assets are placed into a trust, the trust controls the assets instead of the beneficiary. When the trust is created correctly, it can provide for the beneficiary's needs without being included in the marital estate during a divorce or accessed by creditors.
Trust planning can protect your assets and help you maintain control. You can choose who will serve as the trustee and provide how your assets should be distributed in the trust document. By placing assets in a trust, your estranged spouse will not be able to access them. Your children will not receive an outright inheritance the day they turn 18 when they might not have the ability to manage sudden wealth.
Estate Planning Checklist When Getting Divorced
If you are preparing to divorce your spouse, there are several things you should do with estate planning. First, if you don't already have an estate plan, you should create one. Dying without a will could mean your assets are distributed in a way you don't want.
Should you have an estate plan, it’s recommended that you review it any time you undergo major changes, including a divorce. Here's a checklist of what to do if you are preparing to divorce:
- Review your life insurance, retirement account, bank accounts, and other accounts with named beneficiaries. Update your beneficiaries to prevent your spouse from receiving what you don't intend for him or her to receive.
- Meet with an estate and divorce lawyer in New Jersey to go over your estate plan. Make updates as needed to reflect your current situation.
- Name a guardian for your children in your will in case something happens to you.
- Consider whether you should take out a life insurance policy on yourself for your children in case something happens to you before they reach adulthood.
- If your spouse is named as your agent in your power of attorney or advanced healthcare directive, change that unless you want him or her making important decisions about your finances and medical care if you become incapacitated.
- If you plan to remarry, review and update your estate planning documents again to prevent accidentally disinheriting your children from your previous marriage.
- Don't provide for direct inheritances for minor children. If you die before they reach adulthood, they won't be able to legally inherit the assets. As their custodial parent, your former spouse could be appointed by the court to control the assets and access them.
- Set up a trust for your children's benefit to protect them and your assets.
Talk to an Experienced Divorce Lawyer in New Jersey
If you want to end your marriage and are wondering, "How do I protect my assets in the event of my demise?" you should contact an experienced divorce attorney at Ziegler Law Group, LLC. It's important to consider your estate plan when you get divorced to ensure your assets and needs are protected. To learn more, schedule a consultation today by calling (973) 533-1100.
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