Estate Planning After a Divorce
Article updated in March, 2024.
Estate planning for divorced individuals poses a unique set of challenges. In what other circumstance would you find your most cherished assets, your children, in the custody of someone whom you have decided you no longer want to partner with? Whether the divorce is fresh, or simply part of the family history, many of the issues persist. Here’s some key divorce and estate planning tips through the lens of a divorced couple with middle school children:
Real World Example:
Bob and Mary got divorced after 13 years of marriage. They have two daughters, now ages 10 and 12. Both Bob and Mary each earn $150k/year, but Bob now pays child support of $650/week. Mary and the kids still live in the marital home. However, because of his diminished take home pay Bob has had to move to an apartment a couple of towns away. Bob has scheduled parenting time every other weekend, and every Wednesday night, but the children are often reluctant to go because they don’t want to be away from their friends. Mary has a new fiancé who gets along well with the children, but whom Bob doesn’t like.
Because of their divorce, both parties now have very different relationships with each other and with their children. Those new realities will color how they each approach creating an estate plan.
Child custody:
Absent extraordinary circumstances, such as physical abuse, the surviving parent is almost always awarded custody. This is true even if that parent has had only intermittent contact with the children post-divorce, and even if the “new-husband” or “new-wife” of the deceased parent would better fulfill that role. Therefore, when you talk about providing post-death support for children, you are doing it amidst this reality.
Giving your Ex the money:
When dealing with an intact family, parents often choose to use the guardian of the children as their trustee, and often give that trustee general discretion to disburse money for the children’s Health, Education, Maintenance and Support (HEMS). Because most individuals are reluctant to grant such discretion to their ex-spouse, there is often a division between guardianship and financial control. This also means that the general default toward open and generalized support standards may not be sufficient, as divorced spouses may have different feelings toward the appropriate use of funds. For instance, does HEMS require a trustee to pay for a lacrosse tournament in Louisiana, a private college, grad school, or a semester abroad. A trustee will need to be someone who can navigate this framework.
Choosing between your new-spouse and your kids:
The most common conflict in post-divorce estate planning is between a new spouse and kids from an earlier relationship. Both have financial needs, and both have legitimate expectations that should something happen to you, they will be taken care of. It is in effect a zero sum game, as any money which is channeled toward children is money that’s not available to support the new spouse. The balancing of these issues must be approached with a balance of tact and candor.
Life Insurance and Court Orders:
Divorce decrees commonly require that a parent carry life insurance for the benefit of the surviving spouse to make up for lost alimony or child support. Because it is up to the parties to police compliance, it is not uncommon for a party to let their coverage lapse. This is especially true when the costs of ongoing child support stress the non-custodial parent’s budget.
When a party fails to provide the required coverage, litigation against the estate is common. There have been several litigated cases where courts, to the detriment of the decedent’s new spouse, have over-ruled the will and awarded a substantial portion of the estate to the former spouse as a result of failure to keep required life insurance in place.
Special Needs:
Whether it is autism, ADHD, or Asperger’s, it is increasingly common for children to have diagnosed special needs. If a client feels strongly that a child’s needs would be best served by private education or tutoring, those needs should be spelled out directly in the applicable estate plan, and a 3rd party trustee appointed to ensure that funds which are designated for those purposes are used properly.
Estate planning in the post-divorce world is a product of competing interests. The client, new spouse, ex-spouse, and children each have their own needs and concerns. Navigating these conflicts requires both a willingness to bring them into the open, and the ability to address them in a caring and reasoned fashion. Estate planning and divorce require a balance to ensure all interests are addressed, especially for blended families.
Divorce is a life event that requires guidance from professionals. Hopefully you are getting the support you need – emotional, financial, and legal. Let us help you with the legal piece by reaching out to one of our paralegals for a free 15-minute consultation.
