Tips for Estate Planning After Divorce

Getting through a divorce can be rough. Divorce is expensive, time consuming, and emotionally draining. While it might seem daunting to add another task to the list of decisions you need to make, re-working your estate plan after a divorce is very important. While a divorce is ongoing, your current spouse will maintain some rights. Your goal is to keep as much control over your assets while still meeting your legal obligations. After divorce, it is a good idea to go through your estate plan and make necessary changes. Here are five important estate planning changes to consider after a divorce.

1. Health Care Proxy

Your health care proxy is the person who will be making big health care decisions for you in the event that you become incapacitated. By default this is often your spouse, but you may even have a signed health care proxy indicating your spouse as the person in charge of these decisions. You should change your health care proxy as soon as you can to ensure someone you truly trust is making these major medical decisions for you.

2. Power of Attorney

A power of attorney allows someone to act on your behalf for all legal or financial matters if and when you cannot do so yourself. If you had an old power of attorney document naming your ex-spouse, you should get it revoked and if necessary provide notice to your ex-spouse. You will also want to execute a new power of attorney wherein you name a relative, trusted friend, or legal advisor as your designated agent for your assets. Especially if a divorce is not amicable, you will want to do this as soon as possible.

3. Guardianship

This can be tricky. In the event of your death, your ex-spouse would very likely become the guardian of any minor children you share. You can choose to name them as the guardian in your will, but if there is a question of your ex’s fitness as a parent, things can get a little more complicated. You can name someone other than your ex-spouse as the guardian of any minor children. However, should your former spouse seek custody after your death, your designated guardian will need to prove in court that the ex-spouse is unfit. This often means leaving behind a sum of money for your designated guardian to cover litigation costs.

4. Will and Trustee

If you do not want to leave anything to your former spouse, it is important to remove the provisions for such from your will. If your ex is listed as the executor or trustee of your will, you will need to change this. You need to make sure he or she does not receive any of your assets and has no control over your will once you’re gone. In addition to this, if you are designating a minor child as the recipient of any of your assets, your ex will have control of your child’s finances until they turn 18. To avoid your ex-spouse gaining access to this money, you should set up a revocable trust naming someone of your choosing as the trustee to access these assets on behalf of your children.

5. Beneficiary Designations

People often forget about their beneficiary forms. Make sure that your 401(k), IRA, and life insurance beneficiary designation forms are consistent with the terms of your divorce agreement. If you do not make these changes, it can lead to litigation troubles for the person who should be receiving these benefits in the event of your death. Even if you still want your former spouse to remain the beneficiary, you should update this designation after the date of divorce and leave a letter explaining your intentions.

If you have recently gone through a divorce, one of the first things you need to do is get your divorce agreement into the hands of your estate planner. They will be able to ensure you are meeting your legal and financial obligations to your former spouse while still protecting your assets. Veitengruber Law provides full asset protection and estate planning services, and our personalized strategies can help you plan long-term for all stages of life.

Planning Ahead Eases Death Anxiety, Say “Death-Positive” Activists

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For most people, the thought of death can be frightening. No one likes to think about what will eventually come at the end of their life, but it is a fact that we have to face. Life on Earth does not go on forever. Knowing that, it’s crucial to plan ahead at least a minimal amount, especially when it comes to financial matters. Not only will you be assured that money and assets will go where you’d like them to, but your family will be thankful for your initiative as well.

For the big events of life, we make lists and try to be as prepared as possible. College. Weddings. Babies. Jobs. Retirement. The end of life should be no different. Of course, we have those things like skydiving, going on a cruise, swimming with a dolphin, and visiting Italy on our bucket list, also known as things to do before we die. Just like these things compose one of life’s most important lists, so does writing a will, appointing a power of attorney (POA), and considering options for long-term care.

Innumerable, weighty decisions have to be made within just hours of a loved one’s death. With the already existent burden of anxiety and grief, a family doesn’t want to have to think about making all of these decisions after a loved one passes. In addition to financial matters, a family also needs to plan the funeral. Though we don’t want to think about it, making burial arrangements before death exemplifies concern and care for your family members. Over and over again, family members have shown gratitude and confirm the relief and comfort when a family member has pre-arrangements.

Any decision that has to be made after a person passes has the potential to cause disputes between family members. Some family members are going to feel that they have a stronger say in the decision-making process, while others will argue their point of view. Unfortunately, you won’t be there to give them your opinion. Again, by making arrangements before you pass, you eliminate the potential for many issues, before they arise.

There are a few clear-cut steps you can take to side-step some of the issues mentioned above.

1.      Power of Attorney (POA). The first and most crucial decision that you need to make is to appoint a reliable POA. It’s key that this individual is trustworthy, financially intelligent, and is someone that knows you well. When you are sick or unable to do so yourself, this person will deposit checks, take care of bills, and any other financial matters. In the United States today, people are living longer, which means that there’s a higher chance that more individuals will be living with chronic diseases as they age. Some of these diseases can impair a person to the point that they cannot take care of their money. That’s the point where a POA steps in; an individual that can take over for someone in order to ensure the highest quality of life for as long as possible.

2.      Write a will. Since estates worth up to $3.9 million are tax exempt, a will is usually sufficient estate planning for most individuals. A trust is can be produced to cut down on estate taxes and circumvent probate, but taxes aren’t as much of a concern in the current day. Also, the procedures are simpler, so probate is not as common either. Usually a will and a steadfast POA will get the job done.

3.      Living will. Since you’ve already appointed a POA, this step only involves writing a living will, or an advanced-care directive. Your POA will implement your wishes at the end stages of life. Again, when you name a POA, it needs to be someone you completely trust. If you don’t create a living will, your loved ones may run into some horrific problems. If a person is brain dead, a family needs to decide whether or not the individual should be kept on life support. If you’ve already delineated this in a living will, there will be no questions about it.

In addition to these 3 major points, as well as the funeral arrangements, there are a few other minor choices you’ll want to contemplate. Consider the option of donating organs when you pass. Also, look into life insurance if your partner or kids will need financial support without you. Finally, consider long-term care. If possible, it’s best to stay out of nursing homes, as they are incredibly expensive, but if it is a necessary possibility, then you should give it some serious thought.

The most important concept: start planning sooner instead of later (the way we should approach all aspects of life). None of the above steps will happen without conversations with children, spouses, and maybe even your own parents. It’s a tough topic to broach, but it’s absolutely necessary. A few early and simple conversations can save a lot of headache, broken relationships, and hurt feelings in the future, as well as ease your own anxiety about death.

What are Creditors Entitled to After my Bankruptcy Discharge?

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You received your bankruptcy discharge – congratulations on a fresh financial start! Ridding yourself of the debts that were weighing you down can be extremely liberating and is cause for a gigantic sigh of relief.

After your debts are discharged,  there are still certain protocols to follow so that you don’t make an expensive mistake. These rules were created to prevent bankruptcy fraud. For example, a debtor cannot give someone a large sum of money that they will then retrieve after the case is over. The reason for this would be to hide money from the trustee so that it cannot be used to pay creditors. That is a blatant example of bankruptcy fraud, and any debtor who attempts to outsmart the bankruptcy court in this manner has little chance of “getting away with it.” Punishment for bankruptcy fraud is harsh.

There are certainly situations that arise naturally, are totally unplanned, and involve a (former) debtor legally coming into money after their bankruptcy has been discharged. In this case, there are some time limits set to further prevent foul play:

  • Inheritance – If someone close to you passes away within 180 days of the date on your bankruptcy petition, you are obligated to alert the bankruptcy court and that money will then go to your creditors. This rule was instated to prevent people from filing for bankruptcy when they knew someone close to them was on their death bed. By filing for bankruptcy before their death, the inheritance money would be protected and the debtor would have essentially scammed the system. Creepy and illegal.
  • Insurance proceeds – The same rules apply to life insurance proceeds that you become entitled to within 180 days of filing for bankruptcy. It is imperative that you keep careful track of the specific dates of important events surrounding your case. The important date in this case is when your family member or loved one passed away and you became entitled to any life insurance proceeds. If the date of death is within 180 days of the date that you filed for bankruptcy, the life insurance money will go to paying off your debts.
  • Lawsuit settlements – All of your legal claims and lawsuits pending must be listed in your bankruptcy paperwork. If you receive a payout from a lawsuit you initiated before you filed for bankruptcy, that money will generally become part of your bankruptcy estate and will go towards paying your creditors. In New Jersey bankruptcy cases, you can choose to follow either NJ or federal exemption guidelines. NJ exemptions allow you to keep $1000 of any money received via lawsuit. Federal exemptions regarding lawsuit settlements during bankruptcy can be found here.
  • Divorce settlements – While child and marital support obligations will not be affected by a bankruptcy (filed by either spouse), part or all of the marital property settlement, if established within the 180 days following the initial bankruptcy petition, may be liquidated and used to pay your (or your spouse’s) creditors. Your divorce lawyer should discuss the specifics of this with your bankruptcy attorney to ensure that you and your ex-spouse are able to keep as much of your marital assets as possible.

Always consult with your bankruptcy lawyer if you have any questions about the rules following your bankruptcy discharge to ensure that you make wise decisions that won’t end up costing you a significant amount of money.

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