Planning to protect your family’s future from legal chaos?
Life is uncertain. We all know that in every family. There are common life problems like divorce, death, life events and all these need to be handled properly in order to avoid legal mayhem. The line between an easy transition and a complete family crisis is planning.
The problem
Estate planning is for those who are about to die right? Wrong. Estate planning and family law go hand-in-hand when it comes to protecting your legacy. Failing to plan estate distribution could mean your family loosing everything.
The link between the two fields is a lot closer than most people think. Life changes and family disputes like marriage breakups, deaths, births and business dealings get in the way of well thought out estate planning. There is a reason Estate Planning law and Family law fall under the same umbrella.
What you will learn:
- Why Estate Planning Is Not All About Dying
- How Family Law Has An Impact On Estate Planning
- The Connection Between Divorce And Inheritance
- Best Practices To Shield Your Family’s Future.
Why Estate Planning Is Not All About Dying.
Estate planning is not about deciding who gets your stuff when you die. That is just a small part of it.
The truth is
Estate planning is not as morbid as it seems. Most people do not realize estate planning also protects your family during life’s biggest challenges. Divorce, death, disability, family business, and even messy family conflicts.
Divorce changes everything about your family’s financial well-being and can destroy relationships and finances if not handled correctly. Only 45% of U.S. adults have created estate planning documents which means most of your legacy will be decided by a judge if you are not careful. If you fail to create even basic documents your wishes and your loved ones get trampled in the estate planning process.
Consider this…
When you are working with experienced family law attorneys during life events like divorce and death, they are equipped with the knowledge of how these changes affect your long-term estate planning. An expert legal team will look at the big picture and not just the day-to-day problems.
The better part is estate planning documents like Wills, Trusts and Power of Attorneys get a lot more critical when you are dealing with family law. The distribution of assets, health care decisions, power of attorney and other life changing decisions will all be set in these documents. They are even used by family law practitioners to divide assets during a divorce settlement. The right planning will make sure that your wishes get carried out.
Family Law Has An Impact On Estate Planning
This is important
The moment you get married you fundamentally change your estate plan. All of a sudden, you have added beneficiaries, shared bank accounts, insurance beneficiaries and a legal spouse in charge of all of your stuff.
Divorce completely changes things again. Removal of ex-spouses, new marriages and all their assets, changing beneficiaries on life insurance policies and so on and so forth.
The numbers are real
With an estimated 45% of marriages ending in divorce, that is a lot of people in the U.S. needing to change their estate planning needs when they get divorced. Marriage lawyers call it the grey divorce wave.
As for the other side of the divorce, things like beneficiaries need to be updated
- Joint accounts have to be divided
- Insurance policies change
- Retirement accounts have to be divided
- Title to real estate property have to change
Failure to coordinate your estate plan after every major life family event will result in you either
- Leaving everything to an ex-spouse by accident
- Have legal battles between your current family and the ex-spouses.
The Connection Between Divorce And Inheritance
Truth bomb:
Divorce does not automatically exempt your ex-spouse from your estate planning documents. In most states, beneficiaries, wills and trusts have to be updated after a divorce is finalized.
And the result is
Life insurance proceeds can go to ex-spouses instead of your current family. Retirement funds get distributed to your former spouse instead of the kids. Jointly owned bank accounts cause a nightmare in the inheritance chain.
The other side to this is that estate planning is used as a tool during a divorce to settle estate related matters. Judges can require life insurance policies to be used for child support. Alimony is often collected by a trust.
Anticipating these factors during divorce proceedings and including them in settlement can both protect you now from family law threats as well as in the future from estate planning headaches.
Blended families
Blended families have a new set of issues when it comes to estate planning. Step-children, biological children, spouses, former spouses and so on all have a different legal status.
Failing to plan for each of these relationships properly will mean that
The law in each state dictates what happens if you die without planning. You could have step-children inherit nothing because you did not legally adopt them and your biological children inherit everything. Or worse you could have the court give everything to the current spouse.
The use of trusts to protect complex situations
Trusts are one of the best ways to protect both complex financial situations and blended families. Trusts provide far more control over assets than wills, better asset protection, and detailed instructions for trustees.
There are two major types of trusts, revocable and irrevocable trusts. Revocable trusts are flexible and avoid probate. Irrevocable trusts are more strict but provide better asset protection and creditor claims.
Smart planning with these tools during your divorce can help your family in both the immediate and long term. Blended families also benefit tremendously when the right trusts are used.
Planning for the future
Estate planning is for both the living and the dead. Smart planning is thinking about the future and being ready for all possible changes and events that could happen.
The tools you use before marriage will look different to the ones used during the marriage. Divorce agreements have estate planning tools too. Pre-nuptial agreements pre-marriage, Post-nuptial agreements during marriage, divorce agreements and so on.
All these legal documents have to work together to protect you during major family law proceedings and changes while also planning for the future.
Tax planning is also important.
Estate planning and family law decisions have a big effect on your tax liabilities. Tax laws related to estate planning and family law are an entirely different subject but the gist is.
- Divorce property settlements can trigger capital gains taxes.
- Inheritance can be affected by timing.
- Trust distributions affect tax liabilities of beneficiaries.
Tax planning when you get divorced or die or change estate planning documents is very important. Working with professionals with expertise in both tax, estate planning, and family law helps families optimize tax outcomes while also protecting them.
Bringing It All Together.
Estate planning is not as fun as estate planning lawyers make it sound. Families who are protected during life’s biggest changes plan. Understanding that protecting your legacy requires more than just a will. It also requires strategic use of family law practices as well.
Key takeaways:
- Only 45% of adults have estate planning documents in place
- 45% of marriages end in divorce and need estate plan updates
- Major life changes require immediate document updates
- Comprehensive planning solves both immediate family law needs and future estate planning goals.
The price you pay for not doing this is family feuds, legal disputes, lost assets and a mess of broken relationships that can be easily avoided.
You have a choice today to control the situation or to be controlled by events. Choose to protect your family.
