When people ask why I chose family law, I tell them that it’s one of the few areas of law where one not only deals at close range with clients, but one that touches on a plethora of areas of the law. After over 20 years in practice, it has become obvious that the multi-disciplinary nature of divorce extends far beyond the issues of income taxes, bankruptcies, and the business entities that we deal with to value the estate. It extends into areas of trust and estate planning, insurance and a variety of other areas that those experiencing divorce often don’t foresee. The purpose of this Article is to highlight a few of the most common areas where what appears to be ordinary planning can have an unexpected negative result in the event of a divorce.
It is a common occurrence for couples to jointly consult estate planners with the single focus of passing along their wealth to future generations in the most tax effective manner possible. Sometimes these estate plans involve putting assets into trusts that are irrevocable which means that the spouses can not reverse the transfer and the assets that go into the trust are no longer available to be awarded in divorce.
There are times in joint estate planning where only one of the spouses will interact with the estate planner to decide how to structure the plan. While practical, a spouse who is uninvolved in the planning loses out on the chance to understand the plan structure and its implications. Each spouse needs to be advised about not only the consequences on death, but consequences on divorce of any estate planning technique they use.