Getting a divorce is never an easy process; it is emotional and stressful for all involved. For younger couples, children and family estate planning are likely a top concern. For older couples, long-term care, retirement plans, and inherited assets may be more significant concerns to think about. Keep reading for some things to consider about divorce and estate planning if you are ending a long-term marriage.
Dividing assets during any divorce is difficult, but it can be especially challenging when the couple has accumulated many assets together, as well as separately. Couples who’ve been married 20 years or longer may have family heirlooms from each of their families that have become commingled property. Separating some of these assets legally can be a challenge, and some assets cannot be divided evenly.
Divorce can be costly and financially depleting. This especially affects older couples on a limited income. In addition, it is important to consider how financial assets will be impacted, such as retirement accounts, pensions, and life insurance policies. It might seem easy to drop a former spouse as a beneficiary of these accounts. However, doing so could have negative financial and tax implications. You will want to consult financial and legal professionals before removing beneficiaries from accounts. You should also consult with an attorney about how divorce can affect your estate planning.
Tax Implications and What Happens to the House
After a couple divorces, the way they file taxes will change. They will each have to file their taxes individually instead of jointly. Filing taxes separately could impact their tax planning options, especially if they have a large estate.
Couples must also consider the home when thinking about divorce and estate planning, especially when it comes to taxes. Usually, a couple’s home is their most valuable shared asset, and older couples may have owned their home for decades. The value of their home may have increased significantly and transferring ownership of the home from the couple to one spouse could negatively affect that spouse’s capital gains tax when the property is sold. This is because the individual personal residence exclusion is less than what it would be for a couple.
Long-Term Care Planning After a Divorce
Older couples who are thinking about getting a divorce should consider how the divorce will affect their long-term care planning. They may be in the process of transferring assets out of their names and into trusts. The divisions of assets can affect each person’s eligibility for Medicaid benefits.
Divorce and Estate Planning
In some states, including Nevada, divorce or annulment of the marriage of the testator revokes every devise, beneficial interest or designation to serve as personal representative given to the testator’s former spouse in a will executed before the entry of the decree of divorce or annulment and the documents are treated as if the former spouse had died before you (NRS 133.115). If either had their former spouse named as an agent in a power of attorney document or an advance health care directive, then that is also revoked. The divorcing spouses must redo any estate planning documents that name the other as an agent as soon as possible.
In some cases, however, divorcing couples may want the other to still act as an agent for them. If this is the case, they may still need to redo their affected estate planning documents if the state has nullified them. You will want to speak with a qualified estate planning attorney in your state to ensure your wishes are properly documented.
If you are considering getting a divorce, you should seek the help of an experienced estate planning attorney to navigate the process. This is especially important if you have accrued assets together over many years and did your estate planning together. The estate planning attorneys at Michaelson Law can assist in rebuilding your estate plan after a divorce.
This article offers a summary of aspects of divorce and estate planning law. It is not legal advice and does not create an attorney-client relationship. For legal advice, contact Michaelson Law to schedule a consultation today.