Many people create estate plans that empower and protect their spouses. They expect that their spouse will take care of their other family members, including their shared children. When couples divorce, their attitudes toward one another tend to shift dramatically, even though they love their children as much as ever.
It is, therefore, often necessary for one or both parents to create new estate plans post-divorce because their previous documents focused on leaving assets for their spouse. How do many parents ultimately plan for property to pass to their children by altering their estate plans after a divorce?
They add a degree of separation to protect the children
A direct inheritance can be an issue for any child or young adult. They won’t know how to manage those resources properly on their own, so their guardian or other parent will have to take care of those inherited assets until they turn 18 and become legal adults.
Especially when the parent managing those resources had a negative relationship with the person who left the inheritance for the children, they may not properly fulfill their obligation to act in the best interests of the kids when handling the inheritance. They might waste the resources earmarked for the children, thereby diminishing the legacy the other parent can leave for the kids.
By moving the inheritance into a trust, a parent can prevent their former spouse from having control over the children’s inheritance and potentially misusing those resources. The testator can then name any individual they respect and trust to serve as trustee and ensure that their children receive what they should.
A trustee can ensure that the inheritance supports the children while they are still minors while also maintaining resources for later when the children are adults and can assume control over those assets.
Life insurance may require a review as well
Another common issue that people need to address after divorce is whether their former spouse is the named beneficiary for life insurance or accounts with transfer-on-death designations. Such assets will require direct corrections.
A testator will need to file new paperwork with the financial institution or insurance company to ensure that their former spouse does not end up receiving the payout from their life insurance policy or control over their most valuable financial accounts after they die.
Adding a trust to an estate plan can help people to protect their loved ones and the legacy they intend to leave when they die. Of course, this isn’t the best option for everyone, so seeking legal guidance about one’s evolving needs in the wake of a divorce is a good idea.