Wills and Trusts
For those with minor children, among the most important reasons to have a will is to ensure that children are personally and financially cared for. A will allows parents to name a guardian to care for their child(ren) if both parents die so that it is not up to a court to decide who will best care for their child(ren) and so that their child(ren) are not subjected to additional turmoil pending a court decision on their fate. If you have any minor child(ren) to whom you plan to leave an inheritance, it is also of vital importance that you at least have will with a testamentary trust in place for their inheritance if they are still minors at the time of your death. With a testamentary trust, you may designate a trusted friend, family member, or entity such as a bank with a trust department to manage funds for your child(ren) and distribute the funds according to your wishes and in the best interests of your child(ren). For most parents, this is a preferable option to the child receiving a lump-sum check at the age of 18 or 21.
Contrary to what many believe, trusts are not only for the very wealthy. There are numerous reasons to include some form of a trust as part of an estate plan, including, but certainly not limited to, tax planning, handling funds for children until they reach a responsible age, avoiding probate costs and delays with respect to funds held by the trust, preserving a degree of privacy as to the value and disposition of your estate (unlike a will, a trust does not become public record after death), allowing a trustee to handle funds held by the trust for your benefit in the event you become incapacitated and cannot handle your affairs for yourself, or even for the care of a beloved pet. Sodoma Law can advise you as to whether a trust, testamentary or living, would be an effective part of your estate plan based on your circumstances and estate planning goals.
It is of paramount importance to review your will, trust, and other estate planning documents like durable and healthcare powers of attorney, at least every few years to ensure that they still reflect your wishes and achieve your goals. Many circumstances, especially major life events such as the birth or adoption of a child, death of a loved one, relocation to a new state, significant change to your estate, marriage, separation, and divorce, can significantly affect your estate plan and may necessitate an updated plan. Additionally, if any of your fiduciaries – the important people we choose to carry out our estate plan – dies or becomes incapacitated, a review of your overall plan is warranted.
We strongly recommend that you review your estate plan after separation and divorce and update it as necessary. During a separation, provisions in your will and/or trust in favor of your spouse are not automatically revoked, so if you no longer want your spouse (or a relative or friend of your spouse) serving as executor of your estate or trustee of funds from your estate for your child(ren) or other beneficiaries, you will need to have any such provisions in your will and/or trust changed. During separation you may also be able revise your will and/or trust to at least limit your spouse’s inheritance of your estate, but you should consult your estate planning attorney and family law attorney about your particular circumstances since elective share statutes, pre- or post-marital agreements, property settlements, and court orders may significantly impact the extent to which you can legally disinherit your spouse. Also as part of the separation and divorce process, it is imperative to review and potentially update beneficiary designations on life insurance and retirement accounts, although you should consult an estate or family law attorney first.
After a divorce, all provisions in a previously prepared will or trust in favor of a former spouse are automatically revoked by statute, including any bequest or devise of property to your former spouse and any nomination as executor or trustee. This automatic revocation of provisions in favor of your former spouse means that whoever you have named as your backup (or successor) executor or trustee will now be first in line to take that responsibility. You should carefully review any will and/or trust you have to be sure you still believe the persons you named as back-ups for these responsibilities are still the best candidates. The divorce likely changed many circumstances, and you may no longer think it is best to have, for example, your former father-in-law be the executor of your estate or a friend who sided with your spouse in the divorce be trustee of funds for your child(ren). If you did not name any back-ups for executor and trustee or if a backup executor or trustee you named is no longer able and willing to accept that responsibility, court involvement will be necessary, creating additional expense and delay for your family. If your post-divorce goals for your estate involve your child(ren) inheriting the bulk of your estate, you may want to see if a more sophisticated plan is desirable to ensure that the funds are used wisely for your child(ren)’s benefit until such an age that they are likely to be responsible to handle the funds themselves.
Many undesired consequences can be avoided by careful planning. An updated and carefully developed estate plan goes a long way toward making an already difficult time much easier for your family and ensuring that those you care about have as secure a future as possible. Sodoma Law will be happy to work with you to understand your goals and concerns and ensure an effective plan is in place to achieve your goals and give you peace of mind.