Estate Planning Issues for the Family Lawyer
Every family lawyer must have some knowledge of estate planning issues as you are advising your clients through dissolution of a marriage. Even something as simple as documenting in your file that you have advised the clients that they should consult an estate planning attorney or, better yet, a letter to your client that he or she should consult with an estate planning attorney to review their documents in light of the upcoming dissolution.
While not comprehensive the following highlights important issues.
1. Change beneficiary designations of life insurance and retirement plans. If the participant spouse dies before the dissolution is final and the surviving spouse is still named as the beneficiary, then that surviving spouse will receive those benefits unless the participant spouse has changed the beneficiary designation (but remember that in a certain qualified plans the spouse has to waive the joint and survivor annuity or other spousal rights so the waiver should be signed by the non participant spouse prior to the dissolution of marriage and such waiver should be addressed in the settlement agreement if the participant spouse wants to change the beneficiary prior to the date of the dissolution). The IRA committee of the Florida Real Property Probate and Trust Law Section (“RPPTL”) is proposing a statute that would provide that upon dissolution of marriage the spouse named as beneficiary would be deemed to have predeceased the decedent spouse.
2. Review the Last Will and Testament for changes for personal representative, guardianship and dispositive provisions. Under current law, upon dissolution of marriage, a spouse is deemed to have predeceased the decedent spouse for purposes of the Will unless the Will or dissolution judgment provides otherwise. If, however, a spouse dies before the dissolution proceeding is final and the decedent spouse has not changed the terms of his or her Will, then the dispositive provisions of the Will control.
3. Consider the gift tax exemption and the use of the exemptions of both parties prior to the dissolution.
4. Titling of property. If the title of the property is held as tenants by the entirety, then, upon dissolution of marriage, the property is held as tenants in common. If one of the spouses die shortly after the dissolution but prior to the time the deed is changed an ex spouse could hold real estate with stepchildren, a very unpleasant result in most cases.
5. Homestead. It is extremely important that your client understands that if he or she receives the homestead in the dissolution of marriage and he or she dies survived by a minor child then the ex spouse (unless the spouse is generally “unfit”) will be the guardian of the homestead for the minor child. The minor child MUST receive the homestead upon the parent’s death.
6. Review revocable trusts. Under current law, upon dissolution of marriage, a spouse is deemed to have predeceased the decedent spouse for purposes of the trust unless the trust or dissolution judgment provides otherwise. If, however, a spouse dies before the dissolution proceeding is final and the decedent spouse has not changed the terms of his or her trust, then the dispositive provisions of the trust control.
7. Review the durable powers of attorney, durable health care powers of attorney and living wills. Generally (there are always exceptions) spouses do not want an ex spouse making their health care or financial decisions!!!
8. Irrevocable trusts. These trusts need to be reviewed to be sure that the named spouse in the document is automatically changed upon the dissolution of marriage.
9. Review the family limited partnerships, LLC and other corporate documents. You need to be sure that the provisions you draft in your settlement agreement are permitted under the documents governing such entities.
10. Elective share. If a spouse omits his or her spouse from the terms of his or her will or trust because of an impending dissolution of marriage and dies prior to the date of the dissolution of marriage, then the surviving spouse is entitled to 30 percent of the “elective estate”. Florida law provides for an elective share trust but such a trust needs to be specifically drafted in the document.
11. Review charitable trusts. If your client has established charitable split interest trusts then you need to review the provisions of such trusts to be sure that the spouse is not named as a successor annuity or unitrust beneficiary of such split interest trusts. If a spouse is named as the successor beneficiary then you may be able to split the charitable trust.
12. Tips for a qualified domestic relations order (“QDROS”)
A. Get the exact name of the qualified retirement plan (the “Plan”) in the settlement agreement.
B. Either provide for earnings and losses after the division date or not.
C. Make sure that the division date is one that is authorized by the Plan.
D. Make sure the spouse receiving the Plan benefits properly rolls over the money to his or her IRA or better yet make a trustee to trustee transfer.
E. Obtain all the Plan information, such as the name of the Plan administrator, a copy of the actual Plan, the contact name at the Plan for QDROs and the statements of the participant’s accounts in the Plan DURING the negotiations for the dissolution of marriage. Do not wait until after everything has been signed and then try to obtain the information.
F. Have the participant spouse sign a release permitting the non participant spouse to obtain the information from the company sponsoring the Plan.