Estate Planning: Divorce Impacts with Spousal Beneficiaries

Divorce is often a complicated process. It becomes even more complex when a trust is involved, particularly if your spouse is a beneficiary of that trust. Proper planning and drafting of a trust where a spouse is named can reduce the complications.

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Smart Planning

One effective strategy is thoughtful planning and drafting of the trust. Using language like “current spouse” in the trust, rather than naming your spouse directly, can be beneficial.

This approach ensures the trust automatically refers to whoever is your current spouse at any given time, making it more adaptable to changes in your marital status without the need for constant updates.

Options for Addressing Trusts During Divorce

There are various ways to manage a trust during a divorce:

1. Modifying the Trust: Altering the terms of the trust to reflect the new realities post-divorce.
2. Terminating the Trust: In some cases, it might be appropriate to dissolve the trust entirely.
3. Incorporating Trust Provisions in the Divorce Agreement: The divorce agreement can include specific terms about the trust, determining responsibilities, or benefits for each party.

The Importance of Forward Thinking

It's important to consider the impact of the trust both before and during the divorce. This means thinking ahead about how the trust should be structured initially and how it should be handled if a divorce occurs. Implications for each party need to be understood for a fair and effective resolution.

Dealing with trusts in the context of a divorce requires careful consideration and planning. By using flexible wording in the trust document and understanding the various options for addressing the trust during divorce proceedings, you can significantly reduce complications.

To learn more about trusts during divorce and other estate planning scenarios, please contact Richard Kollauf, a Principal at SVA Certified Public Accountants.