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5 Estate Planning Steps for Divorcing Clients

Divorcing clients have a range of estate planning needs, but some issues arise for nearly everyone whose marriage is ending, notes Chicago lawyer and ISBA member Lauren Evans DeJong. So be prepared to counsel your divorcing client about the following five estate-planning tasks.

Changing beneficiary designations. These include removing the soon-to-be ex as beneficiary "of [the client's] life insurance policies, individual retirement accounts, land trusts, and annuities," DeJong writes. Also review "transfer on death or payable on death bank or brokerage accounts, land conveyed by transfer on death deeds, and employee benefits."

Controlling access to online accounts. The Revised Uniform Fiduciary Access to Digital Assets Act, 755 ILCS 70/1 et seq., which took effect last year, "provides a priority system for individuals to specifically control disclosure of digital assets and content of electronic communications" on social media, email, and the like.

"Many clients will not want their…ex to have access to their e-mails, Facebook or Instagram accounts, financial or banking information, diaries, or other personal information," DeJong writes.

"Individuals can use online tools established by providers [e.g., Google's Inactive Account Manager and Facebook's Legacy Contact] to direct disclosure of digital assets," she writes. "[A]n online tool…takes precedence over any other method of directing disclosure." Another option is to draft a statement directing disclosure, which can be included in a client's will, trust, or POA.

Create or revise POAs for health care and property. "Most clients will not want their soon-to-be ex to have authority to [e.g., make end-of-life decisions for them] or have access to medical records." Typically, "the first step for a [divorcing] client with a power of attorney for health care is to revise it immediately if it names the spouse as agent." And divorcing clients who don't have a health care POA should quickly make one, because "[i]f a person has not planned for incapacity, whether short or long term, the law…provides a priority list of those who can take action, beginning, of course, with the patient's spouse."

The POA for property? It's potentially "more dangerous than the health care power," DeJong writes. "It allows access to bank, brokerage, and retirement accounts. Not only can money be withdrawn, but the named agent can obtain statements, change beneficiaries, gain access to a safe deposit box, execute a mortgage, borrow money, and more." If your divorcing client has one, he or she should revoke it or replace the spouse with another agent.

Create or revise a will. Your client probably doesn't want to leave everything to his or her soon-to-be ex. Assuming that's true, clients "should revise [their wills] to provide for their children, parents, siblings, charities - any people or organizations they genuinely want to provide for in the event of their death," DeJong writes.

Even so, "the spouse can renounce the will and elect to take a third of the decedent's estate" if your client dies before the divorce is final. "But the spouse has to make that election." And your client is still better off with a will than without one (unless he or she opts for a revocable trust as described below). "Without a will, the laws of intestacy provide that if the decedent has no children, the spouse will receive 100 percent of the estate" (50 percent if there are kids) compared to a third for renouncing, DeJong writes.

Your client should also name someone other than the spouse as executor and "name a guardian and successor guardian that he or she feels comfortable having custody of his or her children."

Create or revise a revocable trust. With a revocable trust, a divorcing client can bypass both probate and the forced share. "[A] spouse cannot renounce a trust." So a "spouse…not named as a beneficiary…cannot elect to renounce and receive a third of the assets - the spouse receives nothing," DeJong writes.

"This only works, however, if the trust is funded during the client's lifetime," she cautions. The assets must be "titled in the name of the trust, rather than the client's name individually. If a trust exists but is not funded, the assets are administered according to the client's will or according to the laws of intestacy if no will exists," DeJong writes.

For more, see her article in the August ISBA General Practice, Solo & Small Firm newsletter.

Posted on October 11, 2017 by Mark S. Mathewson
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Member Comments (1)

Good Advice!