Control Estate Planning Divorce IssuesTax Professionals' Resource
May 18, 2012 — 1,194 views
Depending on a couple's situation, a divorce can be an overwhelming or liberating scenario for those involved. Divorce is a collaborative process, so taking the time to explain the issues a client could encounter during these proceedings could prove valuable. Few people want to accept that their marriage is ending, and many are affected by the process. However, understanding estate planning gives you the chance to prepare a client for some of the challenges he or she will face.
Estate planning involves taking an inventory of a person's assets and how they will be distributed. As such, a divorce can create a messy situation, because documents that a client and his or her former spouse created to outline their estate are no longer applicable if they separate. Drafting new documents is a necessary part of the process, so understanding the issues you may encounter will help you prepare.
Check out the list below to review some of the estate planning divorce challenges.
There is no doubt that kids will be impacted by a couple's decision to separate. You can make the process as easy as possible for parents by noting how estate planning will affect their children.
You may discuss alimony, child support and custody issues when handling these proceedings. It can be an emotionally exhausting process for a client, but it is crucial to ensure the long-term health and safety of their kids. Clients will appreciate your willingness to take the time to explain how it affects the children financially, which could make it easier for them to discuss the divorce with their kids.
Make sure you consider the short- and long-term ramifications of a divorce with your client. Review educational expenses along with daily costs when examining estate planning during divorce proceedings. Additionally, if the topic is relevent, address how a pregnancy can further complicate the issue, so be sure to discuss how a baby may impact a person's estate planning as well.
An existing will might need to be changed drastically to accommodate a divorce. You can help your client figure out if this is necessary.
Take time to discuss your client's needs to ensure any new documents include mentions of his or her asset inventory and how it should be administered. This could include the distribution of life insurance, retirement plans and other financial assets.
A divorce does not automatically revoke a will, so let your client know about this immediately. A person can change his or her will at any time. However, the longer they wait, the more detrimental that delay could become. If a client dies before a divorce is finalized and nothing has been left to his or her spouse, the ex could potentially obtain part of the estate in a lawsuit.
Collaborative divorce and mediation
Divorce is intended to be a civil process to end a marriage and divide up an estate. However, this is rarely the case, so some couples consider a collaborative divorce or mediation to handle legal proceedings so it can be less adversarial.
Collaborative divorce uses liaisons such as therapists to handle proceedings. Mediation is another option, and requires a divorce mediator - an independent third party - to handle the matters.
Often, you'll still be able to provide guidance to clients with collaborative divorce or mediation, but you may not be able to work directly with them. Be sure to give them as much information as possible about how to handle estate planning in these scenarios.