Divorce Financial Planning – Wills, Trusts and Divorce

Facts about Divorce, Wills and Trusts

Divorce statistics show that the reasons for getting a divorce vary but the need to plan for what will happen to a divorced person’s property and minor children is consistent. That is why after dealing with divorce, it is important for newly single people to also deal with making sure that their financial and child-related affairs are in order should he or she become unexpectedly incapacitated or die. So here is some helpful information about commonly used post-divorce wills and trusts.

What is a traditional Will and why would I need one?

A traditional Will is a legal document wherein the person who creates the Will (“Testator”) provides for the distribution of his or her property at death and designates one or more persons (“Personal Representative”) to manage the distribution of such property. In addition, a traditional Will provides for who will take care of any of your minor children of divorce and any property you leave them (“Guardian”).

A Personal Representative (also commonly known as an “Executor”) has a duty not only to your beneficiaries but also your creditors. However, because of the significant expense involved in obtain a bond to cover theft or misappropriation by a Personal Representative, usually a bond is not required.

Notwithstanding your legal custody (also known as “legal decision making) arrangement, your ex-spouse will presumptively act as parent of your minor children even if you provide for someone else as Guardian under your Will. However, it’s usually best to name a Guardian or Co-Guardians in your Will in case your ex-spouse dies before you, or is for some reason unwilling or unable to act as parent.

A “specific request” is a statement in a Will that a certain asset (for example, an automobile, antique, solely owned real estate, etc.) or specific amount of money will be given to a certain beneficiary(s). Specific bequests become void if the property given is no longer owned at the time of your death. If you make no specific requests, all of your property will pass to your beneficiary(s).

Most people, even those with relatively little property, want a Will to avoid having the court decide how his or her property will be distributed, who will manage such distribution, and who will take care of your minor children.

What is a “Pour-Over” Will with a Revocable Trust?

A Pour-Over Will is a legal document that takes effect upon the death of the testator (the person who creates the Will) and transfers (“pours”) any property solely owned by the testator that was not previously transferred into a revocable trust.

It is important for the testator to transfer all of his or her valuable assets into the revocable trust while he or she is still alive, only leaving things that are of minor value to pour-over into the trust after death, because if the value of the property that pours-over is small enough, the estate may avoid probate entirely or qualify for a quicker and inexpensive “small estate” probate.

A Revocable Trust is the most commonly used estate planning trust which contains instructions about the use and distribution of a person’s property and debts during that person’s lifetime and upon his or her death. There are three parties to a revocable trust: the Trustor (the person who creates the trust); the Trustee (the person/entity who holds title to the trust property); and the Beneficiary (the person or persons who receives benefits from the trust); however, during the Trustor’s life he or she usually takes on all three roles, with a successor trustee taking over when the Trustor becomes incapacitated or dies.

What are the benefits of having a Pour-Over Will with a Revocable Trust?

  • Entirely eliminates or greatly reduces costly and time-consuming probate court proceedings.
  • Provides maximum flexibility because these documents can be revoked, changed, or updated at any time until you become legally incapacitated or die.
  • Protects your privacy after you die, with no public disclosure of your property and debts.
  • In the event of your incapacity or death, automatically appoints someone of your choice to manage your estate without court intervention.
  • Facilitates faster distribution of your property.
  • Directs timely payment of any debts.
  • Allows you to choose a guardian for any minor children of divorce.

What is a Durable Medical Power of Attorney?

A Durable Medical Power of Attorney is a legal document in which you can designate another person to manage your property and take care of any minor children of divorce should you be unable to do so because of incapacitation or legal incompetency.

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