Estate Planning

Estate Planning and Divorce

When you decide to get a divorce, or if you have a child together but are not married and are separating, it's advisable to have your will and other estate planning documents updated or created at the beginning of the process. When you file for divorce, certain case laws and rules relating to the beneficiaries of your prior marriage will go into effect.

If you don't have a will, you haven't created any provisions for who will be the guardian of your children, and who will inherit your assets. You are leaving it up to the state to decide if you do not have a will. You will not have a say if you die without a will, and it will go through the intestacy process. The law of intestate succession in New Jersey states that if you die without a will, your surviving parent(s) receive all assets of the estate. If you die leaving a child or children but no spouse, registered domestic partner, or civil union partner, the children will take equally.

When you marry, have children, divorce or start any new phase of life, you need to create an estate plan agreement in writing.

WATCH: New Jersey Divorce Attorney Abigale Stolfe discusses Estate Planning and Divorce in New Jersey

Stolfe Zeigler New Jersey Divorce Group is here to help you. Call us today at (732) 585-1651 to get started with your initial case evaluation. Learn More: https://www.szfamilylawfirm.com/

Translation

Today, we're going to be talking about estate planning, and it's very appropriate that we're talking about estate planning today, which is the second week of school for Toms river. It's, all homeschooling. I know other towns are hybrid learning, which is a few days on and a few days off. So we're all in that same boat of trying to figure out how to be teachers and worker bees and, and get everything done at home with the kids. So I do hope that you're all doing well with that and staying mentally healthy during this really is just a challenging process. So I'm happy to say that my kids made it through the first week of school. Everyone still has a heartbeat. That's a good mommy moment right there.

Create A Writing

Start with the concept that when you decide to proceed in the divorce process, or even if you're not married and you have a child together, anytime you're in any kind of process where you have an adverse party, meaning another side who has a shared interest, whether it's money, child assets, et cetera, it is advisable, it's a good idea to have your will updated or created. If you do not have a will in the beginning of the process, when you file for divorce, it invokes certain case laws, certain rules, certain expectations as it relates to the beneficiary status of your prior will. It also has some impact on the intestate law. We'll talk about what that is in a second, but if you start with the concept, as you hear me say in basically every video I do, when you have a new phase of life, create a writing.

So you've heard me say before, if you're going to move in with someone, cohabitation agreement; if you're going to move in with someone, quit your job and have a child together, palimony agreement. If you're going to get married for the second time, and you're coming in with significant assets, prenuptial agreement, right? You've heard me say this. This is not new. Now go to the tail end, the backend. Now you're coming. And you're saying, I want to enforce my prenup. I want to enforce my cohabitation. I want to enforce any of these other agreements that I have. That's the time to create or update your will or your trust, or create a trust or whatever the appropriate planning mechanism is at that time. We need to be looking at it and considering it.

So if you think all I have to do is deal with custody and child support. That's it. That's all I want to deal with. That's fine. That's fair. And that's acceptable, but understand if you don't have a will and something should happen to you, you haven't made any provisions for your voice to be heard on who you want to care for your child. You haven't made any provisions for your voice to be heard on how you want your assets to go. Do you want them to go to your parents and your child? Do you want them to only go to your child? Do you want them to go to your siblings? Where do you want your assets to go without having a will in writing? You're leaving it up to the state to make that decision for you. And you know, while many people think, I can deal with it later, I can deal with it later, what COVID has taught us more than anything is that every single one of us at every single age, at every single economic bracket and with complete blindness to our race, color, gender identity, et cetera, we're all susceptible.

Intestacy Statute

So there's not one of us who should not be thinking, what do I want to do for my family for my future when I'm not around, because there will come a point when it's too late for you to have any say on that decision. So we're going to jump right in now to the questions that I had received. But again, keep in mind writing, writing, writing. You're going to hear me say it in just about every video. This is no different. So if I die without a will, what happens to my estate? Well, that's how we started this conversation. So it'll go through the intestacy statute. What that means is I've died without a will. So New Jersey has created a statute to determine how your assets will get divided upon your death and the depending on your status at the time, if you're married, if you're not married, if you're separated, whatever your status is, will guide this.

Basically think of it like a flow chart of where your assets are going to go. So if you think all my assets are going to go to my children, you are probably wrong. So again, this goes back to the concept of start with a writing, write down what you want. If my spouse and I have reciprocal wills, and my spouse dies, and everything goes to me, do my children get after my death. So basically what a lot of married couples do is they go in to a lawyer and say, if I die, I want him to hit everything. And if he dies, I get everything. And if we're both dead, our kids get everything. And a lot of people do that. There's a few caveats. I always give with that instruction, which is number one, you guys are sitting here telling me this is what you want together, but just so you know, husband or wife can call later and change that plan without telling the other.

So, if this is a plan, you have to have reciprocal wills. You do want to frequently have that conversation and make sure no one made any changes to the plan. During the course of time, maybe when they got into an argument or someone threatened to file for divorce or any, any variable of issues that could have come up. So, let's take that hypothetical. We have reciprocal wills. My spouse is dead. Everything is now mine. Do my kids now get everything? If your original reciprocal will be provided wife to husband, husband to wife, last person standing to kids, then yes, your kids get everything. You do not need to update your will because your spouse died. However, should you update your will? Yes, because there is a possibility that when you created that original will, you said husband to wife, wife, to husband, kids. If we die, when the kids were younger, you didn't have grandkids.

Station In Life

They didn't have spouses. You didn't have as many nieces and nephews as you have today, you didn't pay for one child to get their Master's already. And the other child is still in school and you still need to make sure that child is taken care of at the school. So there are life changes. What I always call stations in life that dictate what is the immediate need. So always looking at your station in life to decide whether or not it's appropriate to update this document as you go. And the other key point on that is if your spouse passes and you remarry, it is advisable to update your will at that time. Because what you don't want to do, is you don't want your children to have to defend a will that predates the new marriage when it is your intention that your children still get everything.

It is a lot better for them emotionally, it's a lot better for the family financially, if you update your intention after a major life event so that there can be no question that that is in fact, what you wanted. The introduction of a new spouse did not change that intention in the least, or maybe it did. In which case you need to have a conversation with your kids as well. So a life change, a new station in life should invoke or evoke, evoke this new will or this newest estate plan.

If I set up a trust, do I also need a will? Well, you don't need a will because the state will decide where your assets go if you don't have a will. It is advisable to have a will. A trust cannot create a will. So if you have a trust and not a will, your assets that are not in the trust will go through the New Jersey statute, be allocated according to the New Jersey statute. A will, however, can create a trust. So when you write a will and you have husband - wife, wife - husband, kids get the rest, and those kids are minors, for instance, you can create a trust component within your will to to secure the assets while the children are still minors or for certain uses, et cetera. So if you're choosing which you do not need to choose, but if you're choosing between one, you would want to choose the will over the trust because the will is a more encompassing document.

Types of Trusts

So that now we're going to get into some heavy lifting. So go slow and stay with me. What are the different types of trusts and what are the functions of each? So I am not answering this question fully because it is - I'll tell you how many pages it is - it's a six-page answer. So I'm not giving you the full answer. What I'm going to do is I'm going to give you the name of all the different types of trusts that are the most common. And I'm going to give you bullet points to explain them. But certainly this is not a deep tutorial of these different types of trusts, depending on your needs. We would then determine what is appropriate for you personally, because what fits you may not fit your sister or your brother, right? We have to look at everyone individually. So here we go.

Different types of trusts. We have irrevocable trust. A revokable trust is created during your lifetime. It can be altered. It can be changed. It can be modified. It can be the word revoked, right? I can revoke my intention and create a new intention. It's also called the living trust. So interchangeable, revocable / living. Typically these trusts involved transfers of the title to a home, a significant asset. It serves as the initial trust, and you have the ability to remove property during your lifetime. You can be the beneficiary of the revocable trust. They're great to avoid probate tax.

If you've transferred the assets during your lifetime, creating a revocable trust, but not transfering any assets, doesn't avoid probate tax. It does not. However, a revocable trust does not protect your assets from creditors. So if you have a significant investment account and it is going to be put it in a revocable trust, I'm going to be the beneficiary of the revokable trust. And I'm going to be able to draw from that investment account. With the plan, being that when I pass my intended beneficiaries, let's say my kids are going to get it, and they're not going to have to pay the tax, the probate tax on that significant asset. But during the course of your life, a creditor comes forward and says, you have that trust. And I want to get paid and you can pay me because you have the ability through that trust that trust - a revokable trust does not protect the asset from that credit or demand.

So just know that while saving the probate, it's not protecting the creditor. So depending again on your goal is going to depend on which is the proper trust. So that was a revokable or living trust. Then you have an irrevocable trust. An irrevocable trust is one that cannot be revoked. It cannot be altered. It cannot be changed. It cannot be modified. Once you put the property in the irrevocable trust, it's there and it cannot come out. It is there for the intended beneficiary who can not be changed. So if you want to secure an asset or assets and keep them from having any ability to be touched later, irrevocable trust is the way to go. Then there's the asset protection trust, and this is exactly what it's called, right? It's protecting an asset. So if you have an asset that you want to protect for a different beneficiary, you would create this asset protection and then creditors could not attach to those assets cautioning.

So now we're back - then we have a charitable trust. A charitable trust is a trust that is for the benefit of charity. It's when you give assets to a charity, which is established as part of the total estate plan, you can also do it during your lifetime. So it can be as part of your estate plan. Meaning after I pass, I want them to have seven acres that I live on, or, I'm alive, but I'm moving. And I want to give them the seven acres that I'm living on. It just depends what your goal is.

Constructive trust or an implied trust: that's a court created trust based upon equities presented to the court that would justify the need to create a trust for the benefit of special needs. Stressed is one that is set up for a disabled person, in our world or in the world of divorce. We use these for adult children who can not be emancipated because they will not be self sufficient. They have special needs, and we don't want to impede the child's ability to get the government assistance that they need. And it's not always financial assistance, sometimes it's service assistance. So we don't want to impede their ability to get that assistance. But we also don't want to say that that child is not entitled to child support or a claim to the estate later in life. So by creating a special needs trust, we can merge these different legal concepts and protect the child's interests to the best end to the fullest that we possibly can under the law. So if you do have a child who is disabled and is entitled to government benefits, you will want to talk to your lawyer about the creation of a special needs trust for future support.

If the child is not one who will ultimately be emancipated, a spendthrift trust is a trust that is created so that the beneficiary cannot sell or pledge or give away the Corpus, meaning the thing that creates, that holds together the trust. So if you have a significant bank account and you want your child to get it, but you know, your child gets $20 and spends $47. My daughter did that yesterday. You know, you would want to create a spender's spendthrift trust so they could get the benefit of the trust, but they can't get rid of the assets within the trust.

And then there's multiple other trusts. These are trust that we don't actually have to talk about during this attacks, bypass trust a Totten trust. We're going to bypass some of these, because again, it gets to be very, deep in the discussion. And, and depending on the need that you present, it may require these conversations, but these become narrower and narrower. And this is a more broad forum.

Timing

If my will leaves everything to my spouse and we get divorced and I die before I change my will, does my spouse still get everything? So there's really two answers here. Because there's two timeframes that need to know about when you file for divorce, you enter this black hole of the estate probate world, where the filing for divorce is legal termination, the legal cutoff date for the joint enterprise. So the filing of the divorce in and of itself creates a stop sign in front of the will.

It creates challenges. It creates automatic statutory issues with the will when you die, but not a presumption that there's not just an automatic, Oh no, they filed, they're not entitled. You have to go through a process and it can be a costly and difficult process taking us back to the top of the conversation where I said, when you find yourself in a different station of life, do a new writing when you actually divorce, which is what this question is addressing. There is a statutory presumption that your former spouse does not get the benefit or the receipt of any assets named in the will. Could the ex-spouse challenge it, could the ex-spouse say there's all these reasons why I was still intended to receive? Absolutely. And have we seen it most? Certainly; I had a case where they divorced. The husband became ill. I forgot - he had a Parkinson's or something that required very intense, intense care.

And the wife stepped up. They were together a long time and the wife moved in with him and stepped up. And for years she cared for him. And then he ultimately passed. She challenged the, presumption that she was not entitled because she was the one who came in and cared for him. So the will was the same will that predated the divorce. But again, under New Jersey law, she was, she was presumed to not be a beneficiary. So she didn't challenge it. And she said, well, but there's all these reasons why I should still be the beneficiary. And the fact that he didn't change it is not necessarily evidence that it should just be automatically negated. But instead, it's evidence that it was the intention. But again, it's very costly. It's very time-consuming. When you find yourself in a new station of life just change the writing, whatever the writing is, just change it.

It is so much easier for the people who are engaged and embroiled in the battle. If I set up a trust for my unemancipated children, after the divorce, can my spouse take the money? Maybe you heard me talk about, I didn't even count them, all those different types of trusts and all those different intentions with the trust and all those different pros and cons with the trust, depending on the type of trust you set up and depending on what you designate, it's used to be, your spouse could take from the trust. So if you set up a generic trust, that's for my child's care, education and general welfare, and your former spouse has custody of the children, then they could rightfully say the trust needs to participate in the care, the financial responsibility for the children, just like my spouse would have as though it was child support, make it a kin in your brain to child support.

Can a spouse do that? Absolutely. Can they prevail? Yes, they can prevail. Absolutely. So if it really is your intention to establish a trust with the exclusive use for the children, with the exclusive use for the graduate education or college education or, or any type of exclusivity because in your brain, I know I also have this life insurance that my ex-spouse is going to get to care for their daily needs and they don't need both. Make sure you're clear on your intention and make sure the writing reflects your intention because you can be specific in these trusts and you can designate your intention. But if you go in and you are generic or you are not clear on your intention, no one can read into your document after you pass. We're not allowed to do that.

That's an important sentence. We cannot read into your document after you pass.

So whatever you say is what we're bound to do. We can't later say, well, she said education, but what she really meant was only graduate school. That's not what it says, then that's not what it is. Education is education, regardless of what someone thinks you meant later. So be really clear on your intention, make sure that the writing reflects your actual intention and make sure that anyone who's reading it understands what is supposed to happen so that there can be a less challenge and more flow later.

What are the pros and cons of a living trust? Well, we talked about that. That was the first one we talked about the revocable trust living trust. So you can go back to that answer. One of the big cons obviously is it doesn't protect assets. It is not a shelter. If you will, from creditors.

Does a living trust, avoid a state and probate tax? So again, go back to the answer because it's going to really depend on how you set everything up, if you set it up properly. But the answer is that's the whole point of these things, right? You set up these trusts to avoid tax and to transfer assets to a beneficiary in the most cost-effective way possible. So if you can save significant taxes or you can avoid future creditors, that's why you're doing these trusts. But again, because there are so many different types and different levels and different needs, every family has a different need. You're going to want to make sure that you're very clear on what your need is so that the trust can meet your intention.

Critical Takeaway


And that is the critical takeaway when you're having this conversation with the attorney, preparing the document, make sure you're crystal clear on your need so that the trust can be specific to your need and your future intention.

And as I always always say, new station in life, new writing, even if the new writing is simply a renewal of your prior intention, you want to update it in your new station in life. So if you need our help with this, if you have already gotten divorced and you didn't do the will, if you are thinking about getting divorced and you're uncertain about whether or not you should do a will, or if you haven't changed anything, you're not making a new life decision, but you're pregnant or you just don't have a will give us a call.

We can help you with it. And we can talk about whether or not a trust is beneficial to cover your needs or whether just a will is required.

Protect What Matters Most

Stolfe Zeigler New Jersey Divorce Group is here to help you. Call us today at (732) 585-1651 to get started with your initial case evaluation. Learn More: https://www.szfamilylawfirm.com/

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