Forbes’ recent article entitled “Prenuptial Agreement: What Is A Prenup & How Do I Get One?” explains that a prenup contemplates the end of the marriage, so the couple can divide assets with an objective mindset. A pre-nup can even help protect a business.

Prenups allow you to determine if alimony will be due if the marriage ends, as well as the amount and terms of those payments. A pre-nup can also say what kind of bequests you leave to each other in your will. It can also be good for couples trying to keep separate significant pieces of personal property, including future inheritances and other anticipated income. This is common for couples with a significant age or wealth difference and among older or remarrying couples.

Prenups Aren’t Just for the Very Wealthy. Prenups can be a useful tool for almost everyone.

Protect Family Heirlooms. If you have a family heirloom and want to make sure that if your marriage ends, you’ll get to keep it, you can draft a prenuptial agreement that states the family heirloom is yours.

Pass Property to Children from Prior Marriages. A prenup can be used to establish property rights for second marriages. If you have children from a previous marriage, you can protect their interests in your assets and property.

Clarify Financial Rights. Prenups can help you decide now how assets will be split up instead of waiting until divorce proceedings. While divorce may never come, determining the financial distribution now saves time and headache.

Debt Protection. Prenups also provide debt protection. Some people enter a marriage with substantial financial debts, tax debts, or student loan debt. For couples in this situation, they can sign a prenup and clarify that those debts remain the separate responsibility of the spouse who incurred them, and thereby protect the income and assets of the other spouse.  They can also decide how debts incurred during the marriage will be handled.

Avoid Emotional Arguments. Divorce is emotional. It can be an overwhelming and upsetting process. When you’re negotiating with your spouse about assets, tempers can cloud your judgment about asset distribution. Contemplating these items with a clearer head is better for all.

In answering the question, “Do I need a Prenup?”, under Louisiana law, if you want a pre-nup after getting married (effectively a “post-nup”), you and your spouse have to petition the court in your parish of residence to have the community property regime dissolved judicially.  This can be an expensive process, and may not be used to avoid the unwanted debts that may have been already incurred.

Also, when answering the question, “Do I Need a Prenup?”, keep in mind that if you don’t have one, and one spouse has substantial “separate property”, the income produced by that separate property is community property.  This classification of the income from separate property as community property can include rents, interest, or other earnings from your separate property.  This can result in coomingling of your separate property with community property income over time.  In the event of a divorce, this can present a problem.  If you want to make sure that the income produced by your separate property remains separate, and you don’t have a pre-nup, you have to deliver to your spouse something called a “declaration of paraphernality”, and for it to be effective, you have to be able to prove that it was sent and delivered to your spouse.  Best to do this via certified mail.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “Do I Need a Prenup?” read also these additional articles: Can a 529 Plan Help with Estate Planning? and Can You Prevent Family Fights over Inheritance? and Top Five Estate Planning Mistakes and What Do You Need to Do When a Spouse Dies?

Reference: Forbes (Oct. 24, 2022) “Prenuptial Agreement: What Is A Prenup & How Do I Get One?”

If you’re married, unless there are very unusual circumstances, your spouse should be the beneficiary, especially if you live in a community property state like Louisiana.

A community property state is a state where any asset acquired during marriage is considered to be community property, which means it’s equally owned by each spouse. Any income that either spouse makes during the marriage is community income.

However, there are exceptions that permit spouses to own assets separately from each other. Gifts, inheritances and assets acquired before the marriage are all considered separate property.

There are only nine community property states, plus three states that allow residents to opt into community property law. The other 38 states plus Washington D.C. follow a common law property system where ownership of marital assets is more straightforward: whoever acquired the property owns it outright. However, a couple can choose to become joint owners, such as through a joint bank account.

If you’re now wondering which states are community property states, they are Louisiana, Arizona, California, Idaho, Nevada, New Mexico, Texas, Washington and Wisconsin.

If you’re single, you might have a tougher time naming a life insurance beneficiary.

If you have minor children, ask a lawyer about naming a trust as beneficiary.  This is because a minor use of the proeperty will devolve to the other parent.  This can be often be problematic if you are not married, or the other parent of your child is estranged from you.  If a trust is the beneficiary of the policy, you can name a trusted family member as the trustee of the trust until you child reaches the appropriate age for distribution of assets from the trust.  The distribution can be made in “ages and stages”, over time, if you like.

If you have a disabled family member, consider a special needs trust (“SNT”).  A special needs trust (SNT) will allow the funds in the trust to be used for the disabled family member without kicking the disabled family member off of needs based programs.

If you don’t have a trust, you can name an adult family member or any other trusted person. However, remember that if you name an adult family member, once the proceeds are paid, those funds legally belong to that individual. Therefore, you better really trust that person and make certain that he or she understands that the funds need to be used for the intended minor child/children.

Finally, when making your decision, do so as if this account would be paid out tomorrow.

You should always consult with an estate planning attorney.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “How Do I Pick a Life Insurance Beneficiary?” read also these additional articles: How Do Estate Plans and Trusts Work? and What Should I Know About Buying Funeral Services? and Medicaid’s “Snapshot” Date and Its Crucial Impact on a Couple’s Financial Picture and Claiming Social Security Benefits at Age 70

Reference: Cision (May 20, 2022) “How to Choose a Life Insurance Beneficiary”

If your spouse dies, you may have to decide whether or when to sell your house. There are some tax considerations that go into that decision.  This is addressed in the Kiplinger article, “Paying Taxes on a Home Sold After a Spouse’s Death“.

The biggest concern when selling property is capital gains taxes.  A capital gain is the difference between the “basis” in property and its selling price. The basis is usually the purchase price of property. So, if you purchased a house for $250,000 and sold it for $450,000 you would have $200,000 of gain ($450,000 – $250,000 = $200,000).

Couples who are married and file taxes jointly can sell their main residence and exclude up to $500,000 of the gain from the sale from their gross income. Single individuals can exclude only $250,000. Surviving spouses get the full $500,000 exclusion if they sell their house within two years of the date of the spouse’s death, and if other ownership and use requirements have been met. The result is that widows or widowers who sell within two years may not have to pay any capital gains tax on the sale of the home.

If it has been more than two years after the spouse’s death, the surviving spouse can exclude only $250,000 of capital gains. However, the surviving spouse does not automatically owe taxes on the rest of any gain.

When a property owner dies, the cost basis of the property is “stepped up.” This means the current value of the property becomes the basis. In general, when a joint owner dies, half of the value of he property is stepped up. For example, suppose a husband and wife buy property for $200,000, and then the husband dies when the property has a fair market value of $300,000.  In general, the husband’s one-half is stepped up to a basis of $150,000 (1/2 of $300,000).

In Louisiana, however, because Louisiana is a community property state (and assuming the home is community property and not seprate property), then both “halves” (both the husband’s one-half and the wife’s one-half) get stepped up to fair market value.  In other words, if the home is community property, and the home is sold shortly after your spouse’s death (so that little to no appreciation has taken plance), you will not even need to use the exclusion on the sale of the home (discussed above).  In other words, in community property states, where property acquired during marriage is the community property of both spouses, the property’s entire basis is stepped up when one spouse dies.

Keep in mind that this article only discusses tax implications.  There are other things to consider as well.  For instance, if the surviving spouse may have to go into a nursing home, the sale of the home (which would be an “exempt asset” for Medicaid), would be converted into a “non-exempt asset” (that is cash) after the sale.  So each case is different, and clients should not necessarily let the tax tail wag the estate planning dog.  Talk to an experienced estate planning attorney.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “The Tax Consequences of Selling a House After the Death of a Spouse” read also these additional articles: What to Do If You Want to Leave Your Children Unequal Inheritances and What are Your Early Signs of Dementia? and What Happens if I Take a Bigger RMD? and What are Benefits of Pre-Planning My Funeral?

Even if divorce is the last thing on your mind, when an inheritance is received, its wise to treat it differently from your joint assets, advises a recent article “Revocable Inheritance Trust: Inexpensive Divorce Protection” from Forbes. After all, most people don’t expect to be divorced. However, the numbers have to be considered—many do divorce, even those who least expect it.

Maintaining separate property is the most important step to take. If you deposit a spouse’s paycheck into the account with your inheritance, even if it was by accident, you’ve now commingled the funds.  Also, keep in mind that in Louisiana, income from separate property is still classified as community property, which may later cause the funds to become commingled by default even if you kept them separate.  For example, if you have $100,000 in an account, and the earnings on the account are $5,000 per year, after 10 years, you have (at least) put $50,000 (10 years times $5,000 per year) of community property funds into your separate property account.  To avoid this, Louisiana law requires that you deliver a “Declaration of Paraphernality” to the other spouse, which declares that the income from your separate property funds is community.

You might get lucky and have a forensic accountant who can dissect that amount and make the argument it was a mistake, as long as it only happened once, but the Court might not agree.  Keep in mind that in Louisiana, assets of either sposue are presumed to be community property, not separate property.

Long before the Court gets to consider this point, if your ex-spouse’s attorney is aggressively pursuing this one act of commingling as enough to make the property jointly owned, you could lose half of your inheritance in a divorce.

You might also try to mount a defense of the particular account or asset being separate property, by identifying the means of transfer. Was there a deed for real estate gifted to you from a parent or a wire transfer for securities? This information will need to be carefully identified and safeguarded as soon as the inheritance comes to you, in case of any future upheavals.

To spare yourself any of this grief, there are steps to be taken now to avoid commingling. Document the source of wealth involved as a gift or inheritance, maintain the property in a wholly separate account and consider keeping it in a different financial institution than any other accounts to avoid commingling.

Another way to safeguard gifts and inherited property (to answer the question “Can I Protect My Inheritance from Divorce?”) against a 50% divorce rate is to use a revocable trust. Creating a revocable trust to own this separate property allows you to make changes to it any time but maintains its separate nature, by serving as a wholly separate accounting entity. The trust will own the property, while you as grantor (creator of the trust) and trustee (responsible for managing the trust) maintain control.

For a turbo-charged version of this concept, you could go with a self-settled domestic asset protection trust. This is a more complex trust and may not be necessary. Your estate planning attorney will be able to explain the difference between this trust and a revocable trust.

One clear warning: if you have already created a revocable trust to protect your estate and it is not funded, you may feel like it would be most convenient to use this already-existing trust for your inheritance. That would not be wise. You should have a completely different trust created for the inherited property, and this would also be a wise time to remember to fund the existing trust.

Using a revocable trust this way will also require customized language in your Last Will, as you’ll want standard language in the Last Will to reflect the trust being separate from your other marital property.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “Can I Protect My Inheritance from Divorce?” read also these additional articles: What Assets are Not Considered Part of an Estate? and Will Your Business Die When You Die? and Medicare’s Coverage of New Controversial and Expensive Alzheimer’s Drug Is Limited and What Estate Planning Documents are Used to Plan for Incapacity?

Reference: Forbes (April 13, 2022) “Revocable Inheritance Trust: Inexpensive Divorce Protection”

The loss of a spouse is an extremely stressful event. It comes with many emotions that can be overwhelming for the bereaved.

Hopefully, life insurance is one thing that was put in place to allow those remaining to process their loss without fretting over their finances, says Kiplinger’s recent article entitled “What Is the Best Way for a Widow to Use Life Insurance Proceeds?”

Life insurance death benefits can be paid within 30 days after you submit a claim. To do this, you need a certified death certificate, which in Louisiana is generally issued in a couple of weeks by the funeral home. You should also order plenty of copies (about 15) for closing accounts.

The best use of the money is different for each widow or widower and their unique situation.

Funeral Costs. Use life insurance money to cover these costs to decrease your financial strain.

Ongoing Expenses. When your spouse dies, living expenses do not stop. Your income is frequently reduced. In fact, after the death of a spouse, household income generally declines by about 40% due to changes in Social Security benefits, spouse’s retirement income and earnings. The death benefit from a life insurance policy can help provide the funds you need to help cover your mortgage, car payment, utilities, food, clothing and health care premiums.

Debts. You are generally not personally responsible for paying off the debts of your deceased spouse, provided they are in the deceased spouse’s name alone. However, debts entered into during the marriage are regarded as “community obligations” or “community debts”.  When an estate does not have enough funds to pay all the debts, any gifts that were supposed to be paid out to beneficiaries will most likely be reduced. Note that you may be responsible for certain types of debt, such as community debts or debt that is jointly owned or a loan that you have co-signed. Talk to an experienced elder law attorney to understand Louisiana’s laws so that you know where you stand concerning all debts.

Create an Emergency Fund. Life insurance can help build a liquid emergency fund, which should cover three to six months of expenses.

Supplement Your Retirement. When a woman loses her spouse, she becomes much more vulnerable to poverty. To retire, a person typically needs 80% of their preretirement income to live comfortably.

Education. If you are a young widow, the life insurance proceeds can be used to pay for going back to school to augment your earning abilities. These funds could also cover the cost of college for your children. However, you should only save for college educational costs after your retirement savings are secure.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “How Do I Use Deceased Spouse’s Life Insurance?” read also these additional articles: Is there a Connection between Vitamin Deficiency and Dementia? and What Does ‘Community Property’ Mean? and Can My Ex Get Some of My Estate?  and Will Eating More Fish Help Me Stay Healthy?

Reference: Kiplinger (Dec. 17, 2021) “What Is the Best Way for a Widow to Use Life Insurance Proceeds?”

Community property refers to property acquired by one or both spouses during the marriage, provided the spouses live in a state that has a community property framework, says The Milwaukee Business Journal’s recent article entitled “Is what’s mine, ours? Understanding community property.”

There are not many community property states. That is because most states have adopted common law of property laws. The only community property states are Louisiana, Arizona, California, Idaho, Nevada, New Mexico, Texas, Washington and Wisconsin. Several other states’ laws allow residents to “opt-in” to a community property regime. These states are Alaska, Tennessee, Kentucky and Florida.

While community property laws in the nine community property states differ in a number of ways, they all classify property either as community property—which is owned one-half by each spouse, or separate property, that which is solely owned by one spouse.

For example, in Louisiana, community property is referred to as being under the “community regime”, the default property regime for married persons in Louisiana.  Community property is property acquired during the marriage, and it usually includes the income from separate property (unless a declaration is paraphernality is signed and delivered to the other spouse).

Separate property is generally property acquired prior to the marriage, as well as gifts/inheritances during the marriage.  Significantly, any income from separate property is generally community property.  For example, if you have $100,000 in a bank account before the marriage, and the account earns 5% interest (resulting in $5,000 of income) during the marriage, and at the end of the year $105,000 is in the bank account, $5,000 is community property, and the original $100,000 is separate property.  This is important because over time, a separate property bank account may lose its character as separate property if you are not careful.  To change this result, you need to sign and deliver a “declaration of paraphernality” to your spouse to make sure that the income (the $5,000 in this hypothetical) is classified as your separate property.

Any property acquired during the marriage is deemed to be community property, and any property, of either spouse is presumed to be community property (unless the property claiming it is separate can prove that it is separate). In a common law property regime, property is owned by the spouse whose name is on the title.

In answering the question”What Does ‘Community Property’ Mean?”, it is important to remember that a basic feature of a community property legal framework is that title does not indicate ownership. Therefore, if a married couple deposits income earned during their marriage into an account titled only in the husband’s name, it is still owned one-half by the wife despite the fact that her name is not on the account.

Also, when answering the question, “What Does ‘Community Property’ Mean?”, remember that whether assets are classified as community property or separate property can have a significant effect on a couple’s life, including issues in estate planning, income and estate tax planning and creditors’ rights.

As far as estate planning, each spouse can only dispose of one-half of community property at his or her death. Under Section 1014 of the Internal Revenue Code, community property also gets a “double step up in basis,” which means that built-in appreciation on community property is eliminated at the death of the first spouse to die.  This is a great tax benefit of living in a community property state.  For example, if a husband and wife purchased land for $50,000 many years ago and it is now worth $200,000, there is a $150,000 “built in” capital gain which is potentially taxable income.  However, upon the death of the husband (with the wife surviving), both the husband’s half (valued at $100,000) and the wife’s half (also valued at $100,000) gets a step-up in basis to $200,000 eliminating the capital gains tax on both halves.  If the wife inherits to husband’s half, she can sell the proeprty for $200,000 and will not have to pay federal or Louisiana state income taxes on the sale.  This is because $200,000 sale price minus $200,000 new “stepped up”  basis equals $0 taxable income.

Finally, the classification of an asset as community or separate property can affect whether a creditor of one spouse can recover from that asset.

Importantly, should one of the spouses need to apply for Medicaid long term care assistance, a needs based program, even if the non-applicant is the one that has significant seprate property (with the applicant spouse being significantly poorer), Medicaid will still count the seprate property assets of the non-applicant spouse.  This is why long term care planning is important for everyone, even those who have significant separate property and those that have entered into premarital agreements.

Ask an experienced estate planning attorney who understands Medicaid qualification as well as federal and state income tax law about how community property laws may affect your financial and estate planning.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “What Does ‘Community Property’ Mean?” read also these additional articles: Can My Ex Get Some of My Estate?  and Will Eating More Fish Help Me Stay Healthy? and What’s the Best Way to Mess Up Estate Plan? and How Does a Trust Fund Work?

Reference: Milwaukee Business Journal (Jan. 1, 2022) “Is what’s mine, ours? Understanding community property”

In first marriages, working together to raise children can solidify a marriage. However, in a second marriage, the adult children are in a different position altogether. If important estate planning issues are not addressed, the relationship between the siblings and the new spouses can have serious consequences, according to a recent article titled “Into the Breach; Getting Married Again?” from the Pittsburgh Post-Gazette.

Chief among the issues center on inheritances and financial matters, especially if one of the parties has the bulk of the income and the assets. How will the household expenses be shared? Should they be divided equally, even if one spouse has a significantly higher income than the other?

Other concerns involve real estate. If both parties own their own homes, in which house will they live? Will the other home be used for rental income or sold? Will both names be on the title for the primary residence?

To add to the complexities, if spouses in a second marriage do not have a premarital agreement in place, there can still be issues with respect to the income earned from separate property.  Under Louisiana law, “separate property” (in general) is property acquired before marriage or during marriage through an inheritance.  “Community property” is income or property acquired during the marriage.  A premarital agreement can modify this regime.  “But”, you may say, “If I keep my separate property seprate, it is still mine.’  That is true, but with one major caveat.  During a marriage, income from separate property is community property.  Without a premarital agreement, the only way to keep this income from becoming community property is to deliver to your spouse a “Declaration of Paraphernality”.  This can be an important legal document in many cases.

Planning for incapacity also becomes more complex. If a 90-year-old man marries a 79-year-old woman, will his children or his spouse be named as agents (i.e., attorneys in fact) under his Power of Attorney if he is incapacitated? Who will make healthcare decisions for the 79-year-old spouse—her children or her 90-year-old husband?

There are so many different situations and family dynamics to consider. Will a stepdaughter end up making the decision to withdraw artificial feeding for an elderly stepmother, if the stepmother’s own children cannot be reached in a timely manner? If stepsiblings do not get along and critical decisions need to be made, can they set aside their differences to act in their collective parent’s best interests?

The matter of inheritances for second and subsequent marriages often becomes the pivot point for family discord. If the family has not had an estate plan created with an experienced estate planning attorney who understands the complexities of multiple marriages, then the battles between stepchildren can become nasty and expensive.

Do not discount the impact of the spouses of adult children. If you have a stepchild whose partner feels they have been wronged by the parent, they could bring a world of trouble to an otherwise amicable group.

The attorney may recommend the use of trusts to ensure the assets of the first spouse to die eventually make their way to their own children, while ensuring the surviving spouse has income during their lifetime.

Before answering the question, “How Do I Protect Myself and My Children in a Second Marriage?”, discussions about health care proxies and power of attorney should take place well before they are needed. Ideally, all members of the family can gather peacefully for discussions while their parents are living, to avoid surprises. If the relationships are rocky, a group discussion may not be possible and parents and adult children may need to meet for one-on-one discussions. However, the conversations still need to take place.

Second marriages at any age and stage need to have a prenuptial and an estate plan in place before the couple walks down the aisle to say, “I do…again.”

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “How Do I Protect Myself and My Children in a Second Marriage?” read these additional articles: Can I Add Children’s Names to my House Deed? and Can Grandchildren Receive Inheritances? and Do You Have to Pay Taxes on Inherited IRAs? and Must I Sell Parent’s Home if They Move to a Nursing Facility? and What Is a Trust and How Does It Work?

Reference: Pittsburgh Post-Gazette (March 1, 2022) “Into the Breach; Getting Married Again?”

Having a will doesn’t avoid probate, the court-directed process of validating a will and confirming the executor. To avoid probate, an estate planning attorney can create trusts and other ways for assets to be transferred directly to heirs before or upon death. Estate planning is guided by the laws of each state, according to the article “Before writing your own will know what wills can, can’t and shouldn’t try to do” from Arkansas Online.

In some states, probate is not expensive or lengthy, while in others it is costly and time-consuming. However, one thing is consistent: when a will is probated, it becomes part of the public record and anyone who wishes to read it, like creditors, ex-spouses, or estranged children, may do so.

One way to bypass probate is to create a revocable living trust and then transfer ownership of real estate, financial accounts, and other assets into the trust. You can also create an irrevocable living trust that will avoid probate, but an irrevocable living trust is typically established for more that just probate avoidance.  For both, you can be the trustee, but upon your death, your successor trustee takes charge and distributes assets according to the directions in the trust.

Unfortunately, in Louisiana you cannot retitle assets to be owned jointly to avoid probate, but you can establish it in an equivalent manner and still maintain tax benefits.  However, setting up ownership in this fashion can make the property vulnerable to lawsuits, creditors and predators.  If the other owner has trouble with creditors or is ending a marriage, the assets may be lost to debt or divorce.

Accounts with beneficiaries, like life insurance and retirement funds bypass probate. The person named as the beneficiary receives assets directly. Just be sure the designated beneficiaries are updated every few years to be current.

Assets titled “Payable on Death” (POD), or “Transfer on Death” (TOD) are deceptive in Louisiana.  These assets, it would seem, bypass probate.  At least that is what some bankers will tell you. But as I discussed in my other blog post addressing POD accounts specifically, POD accounts can be a lawsuit waiting to happen.  Read here: What Is a POD Account? A litigation time bomb.

Some people think they can use their wills to enforce behavior, putting conditions on inheritances, but certain conditions are not legally enforceable. If you required a nephew to marry or divorce before receiving an inheritance, it’s not likely to happen. Someone must also oversee the bequest and decide when the inheritance can be distributed.

However, trusts are much more flexible and can be used to protect assets during your life and after death.  Trusts can be used to set conditions on asset distribution. The trust documents are used to establish your wishes for the assets and the trustee is charged with following your directions on when and how much to distribute assets to beneficiaries.

Leaving money to a disabled person who depends on government benefits puts their eligibility for benefits like Supplemental Security Income and Medicaid at risk. An estate planning attorney can create a Special Needs Trust to allow for an inheritance without jeopardizing their services.

Finally, in certain states you can use a will to disinherit a spouse, but it’s not easy. Every state has a way to protect a spouse from being completely disinherited. In  Louisiana, a community property state, a spouse has a legal right to half of any property acquired during the marriage, regardless of how the property is titled.  Further, the spouse has a right to the “marital portion”.  An experienced estate planning attorney can help draft the documents, but depending on your state and circumstances, it may not be possible to completely disinherit a spouse.

Also, in Louisiana, in some situations it may not be possible to even disinherit a child.  Here is Louisiana we have something called “forced heirship.”  Because forced heirship was scaled back in the 1990s, it is often ignored.  But it is ignored at the peril of Louisiana residents.  Read my article on forced heirship to learn more: What is Louisiana Forced Heirship?

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “Does Louisiana Have an Inheritance Tax?” read these additional articles: Should I Use a Corporate Trustee? and What Happens If a Trust Is Invalid? and Is Prince’s Estate Settled Yet? and Does Louisiana Have an Inheritance Tax?

Reference: Arkansas Online (Dec. 27, 2021) “Before writing your own will know what wills can, can’t and shouldn’t try to do”

Whether an ex who was named the beneficiary on their former spouse’s 401(k) will inherit may depend on the couple’s divorce agreement.

This type of question emphasizes how critical it is to update estate planning documents and beneficiary designations after a divorce.

Nj.com’s recent article entitled “Do I have a right to my ex-husband’s 401(k) plan?” says that this question also illustrates the importance of having a well-drafted and thorough divorce settlement agreement, one that details the rights and obligations of each spouse after divorce.

A comprehensive divorce agreement and timely modifications to wills and account beneficiary designations can eliminate any issues concerning the rights of a former spouse about the other’s retirement assets.

If there’s a governing instrument, like a marital settlement agreement and/or a Qualified Domestic Relations Order (QDRO), the terms of that governing instrument will be controlling.

A divorce decree or settlement agreement should specify the rights of each spouse to any retirement assets held by the other. If the decree or settlement agreement provides for one spouse’s interest in the other’s retirement asset, the death of the other spouse shouldn’t, by itself, extinguish that interest.

If the retirement asset is a 401(k), a QDRO would likely have been required post-divorce to secure the interest of the receiving former spouse. After this is prepared and filed with the court, the QDRO would be forwarded to the plan administrator of the retirement account for implementation and distribution to the former spouse.

However, if there’s no divorce decree, agreement or QDRO confirming the interest of a former spouse in the other’s retirement asset, the former spouse would likely not be successful trying to claim a portion of that asset—despite the fact that he or she is the named beneficiary. That’s because there’d be no governing instrument vesting him or her with the right to receive all or a portion of the asset.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “Do I Get Ex’s 401(k) because I Was Named the Beneficiary?” read these additional articles: What Does an Elder Law Attorney Do? and Why Did ‘The Boss’ Sell His Music Catalog? and Should I Get a Medical Alert System? and What If I Become a Sudden Caregiver for a Senior?

Reference: nj.com (Dec. 13, 2021) “Do I have a right to my ex-husband’s 401(k) plan?”

If you neglect to update your estate plan after a divorce, everything you gave to your ex in your original will could very well add up to a nice post-divorce inheritance. Even in the most amicable divorces, it’s probably not what you had intended. Yet, as reported in the article “Rewriting Your Will After Divorce” from Investopedia, people do this.

Luckily, however, Louisiana law provides that if you are divorced after the execution of your Last Will and Testament, the provision leaving the ex-spouse property is revoked.  See Louisiana Civil Code art. 1608(5).  Likewise, any appointment of the ex-sposue to an official capacity in the will, such as an executor, is also deemed revoked.

Your will could provide, however, that your spouse’s legacy would remain intact even in the event of a divorce, although this would be a rare provision in a will.

So the short answer is “no” to the question “Is my will void if I get divorced?”  Only the legacy to the ex-spouse is revoked, and the ex-spouse is removed from any representative capacities to which he or she is appointed.

However, this should give the reader only partial comfort.  If what you left the ex-spouse is revoked, then who would receive what your ex-spouse was originally left?  That portion could pass under the laws of intestacy as it would if you didn’t have a will at all.  This may not be what you intend.

Further, if you live in Louisiana, and your have real estate in other states, the law of that state will likely control the disposition of the real estate, not Louisiana.  So if that other state does not have a similar law to Louisiana, your ex-spouse might not be written out of the will with respect to the property in the other state after all.

Also, keep in mind that there is not a similar provision that relates to trusts in Louisiana.  Therefore, if you have a living trust with your ex-spouse, a reformation or revocation of the trust should be part of the divorce decree or community property settlement.

So if your will leaves something to your surviving spouse and you are currently in the process of separating and divorcing, it’s time for a new will (or a trust), as soon as possible, even though your will is not void if you get divorced.

Also, don’t forget about assets passing outside of the will.  Assets with beneficiary designations, like life insurance, investment accounts and some retirement plans, go directly to the beneficiary listed on the account regardless of what your will might say!  If the beneficiary is your ex, you should also make those changes as soon as possible.

Even though your will is not void in the event of divorce, your estate plan must also update any property gained or lost during the divorce. If any assets are specifically identified in your will, be sure to update them.

The executor (the person named in your will to oversee the distribution of assets) probably has to be changed as well. If you had previously named your ex-spouse, it’s time to name a new executor.

Your will is also used to name a tutor (guardian) for minor children. If you have children with your ex, you will want to appoint a tutor (guardian) in case both you and your ex are not alive to raise them. If you die unexpectedly, your spouse will raise them, but you should still name a tutor. If a surviving parent has a serious problem, like addiction, child abuse or incarceration, naming a tutor in your will and documenting the reasons you believe your ex is an unfit parent may be a deciding factor in how a judge awards custody.

A will can be updated by writing a codicil, which is an amendment to a previous or a prior will. However, since there may be many changes to a will in a divorce, it is better to tear up the old one—literally—and start over. A prior will is revoked by physically tearing up and destroying the original and including language in the new will that it will revokes all prior wills. Your attorney will know how to do this properly.

The bottom line is that your will is not void if you get divorced.  But you will likely have to draft another will in its place anyway.  Also, your ex may have the legal right to challenge your will. This is why an estate planning attorney is so necessary to create a new will. In a divorce situation, the use of an experienced estate planning attorney can make the difference in your ex receiving a windfall and your new spouse or children receiving their rightful inheritance.

To learn more, read: Do I Have to Give My Husband’s Children from First Marriage Anything When He Dies? and No Kids? What Happens to My Estate? and I am Concerned That My Son-in-Law will get My Estate and What is Louisiana Forced Heirship?

BOOK A CALL with Ted Vicknair today to find out more about how you can plan your future for your and your family’s security.