Separation and divorce are emotional and stressful times marked by significant changes. There is so much to do that attention is directed to the most urgent problems requiring immediate attention. As a result, it is common to overlook less pressing, but equally serious, threats to you and your family’s personal and financial wellbeing.
These “threats” are the product of assumptions made during marriage, which, once true, may no longer be so. It is worthwhile to reflect on these assumptions, discussed below, and perhaps make changes to avoid undesirable consequences.
Assumption #1: “If I become incapacitated, I want my spouse’s family/friends to manage my finances and make health care decisions on my behalf.”
During marriage, it is common to develop relationships of trust with your in-laws and friends of your spouse. You may have even appointed your in-laws and spouse’s friends to serve as authorized agents to make health care and financial decisions on your behalf, should the need arise. You may have executed powers of attorney for finances, Advance Health Care Directives, etc. Are you still comfortable with the individuals you appointed making these important decisions for you? If you are not, or are not sure, it may be time to make some changes. No one wants someone making decisions on their behalf who no longer has their best interests in mind.
Assumption #2: “If my spouse and I die, I want my spouse’s family/friends to raise my children, if my spouse and I are not able to.”
If you and your spouse die and leave minor children, who have you appointed to care for your minor children? Have you appointed your in-laws and friends of your spouse to serve as guardians for your minor children? Are these individuals still your top choice? If not, consider revising your nomination of guardians for your minor children.
Assumption #3: “If I die, I want to leave everything to my spouse.”
A marriage is a joint economic venture, and typically spouses wish to leave all assets to their spouse upon death. The plan is generally for the surviving spouse to then leave everything to their children once the surviving spouse dies.
Once separation or divorce are initiated, few wish for their soon-to-be ex-spouse to inherit their assets. Instead, most people wish to provide directly for their children. However, the law does not automatically allow this to happen, and if you pass during the pendency of your divorce, your soon-to-be-ex-spouse may stand to inherit all, or most, of your estate. This is particularly true if you and your spouse held title to assets jointly or held assets in a joint living trust.
For example, when married couples purchase real property together, they typically hold title jointly, either as joint tenants with right of survivorship or as community property. If either of the joint owners dies before the divorce is finalized, the surviving owner is automatically declared the sole owner of any property owned in joint tenancy with right of survivorship or as community property. You can avoid this potentially undesirable outcome by unilaterally executing a deed changing your half ownership interest in the property from joint tenancy with right of survivorship or as community property to tenants in common. If you own property as tenants in common and die before your divorce is finalized, your half interest in the property can then be distributed according to your wishes in your will or through intestacy, rather than by operation of law to your soon-to-be-ex-spouse.
Similarly, if you and your spouse held assets in a joint living trust and your joint living trust provides that the surviving spouse inherits the trust’s assets upon the death of the first spouse, if you pass during the pendency of your divorce, your soon-to-be-ex-spouse may inherit all your assets in the joint living trust, even if you were legally separated. Although you may not create or fund a new trust during the pendency of your divorce, you can however revoke your joint living trust and create a new will to direct distribution of your assets upon your passing and you may even intentionally disinherit your soon-to-be-ex-spouse.