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Divorcing? Don’t Let Your Estate Plan Fall Through the Cracks
Eileen Cozzi

If you are going through a divorce, you are probably feeling a little overwhelmed by all the legal and financial items you must attend to before the marriage termination is final. These tasks can be difficult, but revising your estate plan does not have to be. An estate planning professional can help you update documents and ensure that your children benefit according to your wishes — not your ex-spouse’s.

What the law says

Divorce generally extinguishes your spouse’s rights under your will or any revocable living trusts. So there is little danger that your ex-spouse will inherit your property outright, even if those documents have not been revised yet. If you have minor children, however, your ex-spouse might have more control over your wealth than you would like.

Generally, property inherited by minors is held either by a guardian of the estate of the minor appointed by the probate court until they reach the age of 18 or by a custodian under the Uniform Transfer for Minors Act until they reach the age of majority (age 18 in most states, but in some states age 21).  Your ex-spouse, as the surviving parent, is likely to act as the guardian of the estate or as custodian, giving him or her control over your assets while the children are minors. This can be avoided by creating a revocable living trust.

Benefits of a Trust

With a revocable living trust, you appoint the trustee of the trust who will be responsible for managing assets and making distributions to your children on your death. You can also decide when and under what circumstances your children will receive your property. For example, unlike a guardianship and a custodianship, the trustee is not required to distribute the assets to your child when they reach age 18 (or 21). You can instruct the trustee to delay distributions until your children are past the age of majority or have reached certain milestones, such as graduating from college or finding a job.

Furthermore, trusts can be beneficial when adult children inherit assets. They can be designed to shield assets from your children’s ex-spouses, should they divorce. However, if your children have too much control over a trust, a court may view its assets as marital property subject to division in divorce. For greater protection, give your trustee full discretionary authority over distributions.

A revocable living trust can be amended or revoked by you any time prior to your death or incapacity.  Any assets transferred to your revocable living trust during your lifetime are typically not subject to the probate process.

Change Your Beneficiary Designations

Your beneficiary designation, not your will or trust, controls who receives the benefits from your retirement plans and life insurance policies. If your ex-spouse is a beneficiary of your retirement plans or life insurance policies, you should change your beneficiary designations, even if you believe your divorce settlement agreement or state law extinguishes your ex-spouse’s rights. Keep in mind that retirement plans governed by ERISA, like 401(k) plans, are not subject to state law. A new beneficiary designation removing your ex-spouse as beneficiary and listing new beneficiaries will prevent claims by your ex-spouse with respect to the benefits.

Take action now

Right now, you probably have a lot to think about and get done. But do not let your estate plan fall through the cracks. Contact your advisor at the earliest opportunity.

For more information contact Eileen Cozzi at [email protected] or 312.670.7444. Visit to learn more about our Wealth Management Group.

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