Estate Planning During Divorce
If you’re thinking about a marital split, or perhaps you’re in the midst of the divorce process already, we understand there may be many anxiety-inducing pieces to consider. Divorcing spouses can sometimes have serious concerns about their soon-to-be ex-spouse making financial and medical decisions on their behalf. Estate planning can often be overlooked during the divorce process, when in fact, it's a critical step to ensuring you and your assets are safe during the proceedings. Below are some of the most common questions we receive about the divorce and estate planning process.
An Advance Directive naming a trusted friend or family member would give the person of your choice the power to make health care decisions if you are unable to communicate your wishes. A Power of Attorney would similarly authorize a person you trust to manage your finances if you are unable to do so. Properly executing these documents, as soon as possible in the divorce process, can give you much-needed peace of mind. Also, these documents can continue to be effective after the divorce is final, meaning these essential tools are set-up for the future.
Under Oregon law, when the divorce is final, any provisions in your existing estate plan that are in favor of your ex-spouse are revoked and your ex-spouse is treated as if he or she predeceased you (unless the documents say otherwise). The default laws of intestacy also change to distribute your assets to your nearest living relatives.
If you have a revocable living trust and you are the only trustee, you can change the provisions of your trust; however, this must be done very carefully. You may not be able to change the nature of the assets held by the trust without violating the asset restraining order in place during every divorce. If you have an irrevocable trust, a joint trust with your spouse, and/or your spouse is also a trustee, you should seek the advice of an experienced estate planning attorney to review the existing trust documents and advise you on the actions you can and cannot do both during and after the divorce.
The asset restraining order can impact your ability to plan for your incapacity or death. For example, without the consent of the other party, you cannot change the beneficiary designations on your life insurance policy or retirement accounts. You also may not be able to transfer assets in or out of a revocable living trust (whether the trust is a joint trust with your spouse or a separate trust). While you can still execute a revocable living trust, you may not be able to transfer assets to that trust during the divorce, which can temporarily limit some of the advantages of having a revocable living trust.
Your family law attorney can work with your estate planning attorney to make sure you do not violate the asset restraining order when executing estate planning documents during a divorce. After the divorce is final, there are no restrictions on what you can do with your assets (unless your divorce judgment states otherwise).
However, the elective share takes into account all assets of the deceased and surviving spouses, not just the assets of the deceased spouse’s estate. In other words, the judge would evaluate the whole picture and determine what assets the surviving spouse has before awarding any additional property to him or her. The judge may also decide to reduce or deny the elective share if the parties were separated and the judge determines a lesser amount is reasonable and proper under the circumstances.
The attorneys at Gevurtz Menashe are experienced and knowledgeable about the benefits and limits of estate planning during the divorce process. The family law and estate planning lawyers work collaboratively and economically to share information that ensures you and your assets are protected during the divorce proceedings.
1: If I become incapacitated during my divorce, who will make decisions for me?
Until your divorce is final, your spouse is the person with priority to make both financial and healthcare decisions, should you become incapacitated. Many people going through a divorce are uncomfortable with their soon-to-be ex-spouse deciding things such as tube feeding and life support, in addition to controlling their finances, should something happened to them before the divorce is final. Most would prefer naming another person to make those crucial decisions on their behalf.An Advance Directive naming a trusted friend or family member would give the person of your choice the power to make health care decisions if you are unable to communicate your wishes. A Power of Attorney would similarly authorize a person you trust to manage your finances if you are unable to do so. Properly executing these documents, as soon as possible in the divorce process, can give you much-needed peace of mind. Also, these documents can continue to be effective after the divorce is final, meaning these essential tools are set-up for the future.
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2: Does filing for divorce impact my existing estate plan?
Unless your estate planning documents say otherwise, filing for divorce will not change your estate plan or the legal default rules about what happens to your assets if you pass away without an estate plan (the laws of intestacy). If you want control over what happens to your assets upon your death, you need to execute a will or a trust to direct the distribution of your assets and appoint a person you trust to make sure your wishes are followed.Under Oregon law, when the divorce is final, any provisions in your existing estate plan that are in favor of your ex-spouse are revoked and your ex-spouse is treated as if he or she predeceased you (unless the documents say otherwise). The default laws of intestacy also change to distribute your assets to your nearest living relatives.
3: Can I change (or create) an estate plan during a divorce?
There are a few exceptions, but you do have the ability to change your estate planning documents at any time, including during divorce. In fact, making a will during divorce proceedings is an excellent time to do so. You can revoke and/or execute a will, Power of Attorney and Advance Directive during the divorce. However there are laws that may prevent you from completely divesting your spouse in Oregon.If you have a revocable living trust and you are the only trustee, you can change the provisions of your trust; however, this must be done very carefully. You may not be able to change the nature of the assets held by the trust without violating the asset restraining order in place during every divorce. If you have an irrevocable trust, a joint trust with your spouse, and/or your spouse is also a trustee, you should seek the advice of an experienced estate planning attorney to review the existing trust documents and advise you on the actions you can and cannot do both during and after the divorce.
4: What is the asset restraining order?
The asset restraining order prohibits spouses from disposing of, or concealing their assets during a divorce, with some limited exceptions. The asset restraining order is in effect for the Petitioner when the divorce petition is filed and for the Respondent when he/she is served with the divorce petition. The purpose of the asset restraining order is to protect both spouses: neither spouse is allowed to sell, hide, encumber, or otherwise dispose of their assets until the divorce is final and both parties understand which assets are their own (unless they agree or a judge orders otherwise).The asset restraining order can impact your ability to plan for your incapacity or death. For example, without the consent of the other party, you cannot change the beneficiary designations on your life insurance policy or retirement accounts. You also may not be able to transfer assets in or out of a revocable living trust (whether the trust is a joint trust with your spouse or a separate trust). While you can still execute a revocable living trust, you may not be able to transfer assets to that trust during the divorce, which can temporarily limit some of the advantages of having a revocable living trust.
Your family law attorney can work with your estate planning attorney to make sure you do not violate the asset restraining order when executing estate planning documents during a divorce. After the divorce is final, there are no restrictions on what you can do with your assets (unless your divorce judgment states otherwise).
5: Can I completely disinherit my spouse?
Technically, Oregon law does not allow one spouse to completely disinherit the other. If an estate plan makes no provisions for the deceased person’s spouse, the spouse is entitled to his or her “elective share.” The elective share is a percentage of the total combined assets of the deceased and surviving spouses based on the length of the marriage (33% is the highest elective share for a marriage that lasted 15 years or more).However, the elective share takes into account all assets of the deceased and surviving spouses, not just the assets of the deceased spouse’s estate. In other words, the judge would evaluate the whole picture and determine what assets the surviving spouse has before awarding any additional property to him or her. The judge may also decide to reduce or deny the elective share if the parties were separated and the judge determines a lesser amount is reasonable and proper under the circumstances.
6: How do I begin the estate planning process?
Contact an experienced estate planning attorney and make sure he or she knows that you are anticipating or are in the middle of a divorce. Make sure the estate planning attorney is knowledgeable about the restrictions in place during a divorce before hiring them. Finally, it's importnat to authorize both your family law and estate planning attorney to communicate with each other about your case and share important documents and information to efficiently and cooperatively work together to help you achieve your goals.The attorneys at Gevurtz Menashe are experienced and knowledgeable about the benefits and limits of estate planning during the divorce process. The family law and estate planning lawyers work collaboratively and economically to share information that ensures you and your assets are protected during the divorce proceedings.