Divorce can be hard for many reasons. Apart from the emotion and stress involved with divorce, there are things you must take into account. During a divorce, younger couples may be concerned about their children’s custody and interests. Older couples may be more focused on retirement plans, inherited assets, trusts, and estate plans. This post walks you through the effects of a divorce on your estate plan.
Asset Division
Asset division can be hard in any divorce, particularly for those who have accumulated plenty of assets. Family heirlooms can become comingled property, which makes asset division even tougher. A couple may also need to split their financial assets including life insurance policies, pensions, and retirement accounts. While a spouse may want to remove their spouse as a beneficiary to their accounts, this can have financial and tax implications. This is where an experienced estate planning attorney in Hawaii can help. Divorces can deplete resources because they are usually expensive.
Tax Implications
The way you handle your split can have tax implications. After a divorce, you must file taxes individually instead of jointly, which affects your tax planning options. As the marital house may be your most valuable asset, transferring ownership to one spouse can affect your capital gains tax if you sell the property. This is due to the possible increase in the value of the house after years have passed.
Long-Term Care Planning
Divorce for older couples can directly affect their long-term care planning. A transfer of assets into a trust can affect the Medicaid benefits eligibility of every spouse.
Estate Planning
When you made a will before your divorce, the latter can automatically revoke any gift you gave to your ex. In addition, if you named your ex as an estate executor, divorce also automatically revokes this will. During your divorce, you should redo your estate planning documents that name your spouse as an agent. Revoking an old will and making a new one can help you avoid revocation.
Whether you are still planning a divorce or going through one, you must consult with a skilled estate planning lawyer who can guide you as you navigate the state’s divorce process and its effect on your estate plan. An estate plan is meant to make sure your wishes are defined and respected. An experienced attorney will walk you through the implications of a divorce and help you address any issues that may arise.
