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?”

High-profile cases like the Bezos or the Gates should cause many people to consider how their business and marital assets are tied together. You need to have plans in place from the beginning. No one thinks their partnership will end. However, it’s necessary to have a plan in place, just in case.

The Dallas Business Journal’s recent article entitled “Does your business need a prenup?” explains that there are three typical outcomes when married couples working as business partners decide to end their relationship:

• One individual buys out the other partner’s shares and continues running the business;
• The partners sell the business and divide the proceeds; or
• The couple continues working as partners after the divorce.

Safeguards can be put in place on the first day of the relationship to protect your personal and business assets in the event of a divorce. A way to do this is through a prenuptial agreement, which states what will happen if a split happens. A pre-nup should:

• Establish the value of the business as of the date of marriage or the date the agreement is signed;
• Detail a course of action with the appreciation or depreciation of the business from the date of the marriage;
• Say how business value will be measured; and
• Specify the allocation of business interests to be awarded to each spouse in the event of a divorce.

In addition to a prenuptial agreement, any privately held company should have a shareholder agreement (or “operating agreement” for non-corporations). The shareholder agreement is one of the most important documents owners of a closely held business will ever sign, but unfortunately, many businesses don’t have it.  It can also help to protect assets against judgment creditors and predators.

It controls the transfer of ownership when certain events occur, like divorce and states the following:

• Which party will buy out the other’s shares of the company if a buyout occurs; or
• If either party has the right to sell, how the ownership interest will be valued and the terms and conditions concerning the acquisition.

Because there are some tax implications involved in a buyout, it’s best to bring in experienced estate planning attorney who understands federal income tax law (and possibly federal estate tax law) for this process. In addition, life events like divorce or changes in a business partnership are an appropriate time to update your will, estate plans and any necessary insurance policies.

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, “What Happens If Couple Divorce and Own Business?” read also these additional articles: Can Some Foods Help Prevent Alzheimer’s? and Wayward Senior Tracked by Bluetooth Technology and What is the First Sign of Dementia? and Who Is the Best Person for Executor?

Reference: Dallas Business Journal (Aug. 1, 2022) “Does your business need a prenup?”

For seniors enjoying the romance and vitality of an unexpected late-in-life engagement, congratulations! Love is a wonderful thing, at any age. However, anyone remarrying for the second, or even third time, needs to address their estate planning as well as financial plans for the future. Pre-wedding planning can make a huge difference later in life, advises a recent article from Seniors Matter titled “Your senior parent is getting remarried—just don’t ignore key areas.”

A careful review of your will, powers of attorney, healthcare proxy, living will and any other advance directives should be made. If you have new dependents, your estate planning attorney will help you figure out how your children from a prior marriage can be protected, while caring for new members of the family. Failing to adjust your estate plan could easily result in disinheriting your own offspring.

Deciding how to address finances is best done before you say, “I do.” If one partner has more assets than the other, or if one has more debts, there will be many issues to resolve. Will the partner with more assets want to help resolve the debts, or should the debts be cleared up before the wedding? How will bills be paid? If both partners own homes, where will the newlyweds live?

Do you need a prenuptial agreement? This document is especially important when there are significant assets owned by one or both partners. One function of a prenup is to prevent one partner from challenging the other person’s will and trusts. There are a number of trusts designed to protect loved ones including the new spouse, among them the Qualified Terminable Interest Property Trust, known as a QTIP. This trust provides support for the new spouse. When the spouse dies, the entire trust is transferred to the persons named in the trust, usually children from a first marriage.

Most estate planning attorneys recommend two separate wills for people who wed later in life. This makes distribution of assets easier. Don’t neglect updating Powers of Attorney and any health care documents.

Before walking down the aisle, make an inventory, if you don’t already have one, of all accounts with designated beneficiaries. This should include life insurance policies, pensions, IRAs, 401(k)s, investment accounts and any other property with a beneficiary designation. Make sure that the accounts reflect your current circumstances.

Sooner or later, one or both spouses may need long-term care. Do either of you have long-term care insurance? If one of you needed to go into a nursing home or have skilled care at home, how would you pay for it? If you can’t afford long-term care insurance, there are alternatives to get you qualified for Medicaid long-term care if you have a good estate plan.  An estate planning attorney can help you create a plan for the future, which is necessary regardless of how healthy you may be right now.

Once you are married, Social Security needs to be updated with your new marital status and any name change. If a parent marries after full retirement age and their new spouse’s benefit is higher than their own, they may be able to increase their benefits to 50% of the new spouse’s benefits. If they were receiving divorced spousal benefits, those will end. The same goes for survivor benefits, if the person marries before age 60. If they’re disabled, they may still receive those benefits after age 60.

Setting up an appointment with an estate planning attorney a few months before a senior wedding is a good idea for all concerned. It provides an opportunity to review important legal and financial matters, while giving both spouses time to focus on the “business” side of love.

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, “Senior Second Marriages and Estate Planning” read also these additional articles: Why Have a Joint Revocable Trust? and Does ‘Gray Divorce’ Fit into Estate Planning? and What Do I Need to Do Right after Spouse Dies? and Can a Family Limited Liability Company Reduce Estate Taxes?

Reference: Seniors Matter (April 29, 2022) “Your senior parent is getting remarried—just don’t ignore key areas”

According to the Pew Research Center, the divorce rate has more than doubled for people over 50 since the 1990s. The Pandemic is also adding to the uptick, says AARP’s recent article entitled “Getting Divorced? It’s Time to Update Your Caregiving Plan.”

A divorce can be financially draining. Moreover, later-in-life divorces frequently impact women’s finances more than men’s. That is because in addition to depressed earnings from time spent out of the workforce raising children, women find themselves more financially vulnerable post-divorce and more likely to serve as caregivers again in the future. Even so, for partners of all genders, it is important to consider the longer-term financial outlook, not just the financial situation you’re in when you are actually dissolving the marriage.

You and your spouse will be dividing assets and liabilities and the responsibilities regarding spousal support. How one of you will live if the other gets sick or passes away should also be part of this conversation.

Consider where you’ll need to make changes. One may be removing your spouse from beneficiary designations on all your accounts. Your divorce agreement may also include buying life insurance or maintaining a trust or beneficiary designations for one another.

Create or update your estate plan immediately. You should also ask your estate planning attorney to review your marital agreement. They will have suggestions about how to align your estate plan with your divorce obligations. If you and your ex are co-parenting children, your estate plan should address who their guardians will be, if both biological parents pass away. It is also important to address who will manage any inheritance, if you don’t want your ex-spouse handling assets you may leave to your children.

Create your life care plan, which means naming health care proxies or surrogates (who will take care of your medical affairs, if you’re in need of caregiving), designating a financial power of attorney (who will take care of your finances and legal affairs), and naming a guardian for yourself if you’re incapacitated.

Consider the way in which your divorce will impact your children and extended family if you need caregiving. At a minimum, agree between yourselves what level of contact you can manage and, if you share children and loved ones, know that your lives will cross along the way.

If you have minor children under age eighteen (18) under your care – either children or grandchildren – when it comes to your assets to be inherited by these children, you should review with your attorey whether you will want your ex-sposue to manage the assets on behalf of these children.  If you don’t, it is important to establish a trust under which you name your own trustee to manage those assets (at least until the children are eighteen (18), if not even later).

While your marriage may not last, the connections will, so make a wise plan.

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 ‘Gray Divorce’ Fit into Estate Planning?” read also these additional articles: What Do I Need to Do Right after Spouse Dies? and Can a Family Limited Liability Company Reduce Estate Taxes? and Should I have a Pour-Over Will? and How Do I Find a Great Elder Law Attorney?

Reference: AARP (Jan. 25, 2022) “Getting Divorced? It’s Time to Update Your Caregiving Plan”

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”

For many people, their will is their final communication to the world.

A will states how their property should be distributed upon their death. CNBC’s recent article entitled “Your ex-spouse could inherit your money. How to avoid this and other estate-planning mistakes” says that depending on how you plan, it may have a few some surprises for those who are close to you.

There are a couple of situations where you could inadvertently leave money to people you no longer intend as heirs, much to the surprise of other heirs.

An ex-spouse could get some of your money when you die, if you do not update your beneficiaries under a retirement plan.

Divorce does not automatically change a beneficiary designation, unless the divorce decree includes a stipulation to change it. IRAs are the same, so it is not uncommon for an IRA owner to die without having changed the beneficiary designation after a divorce. It’s usually just a simple oversight.

However, Louisiana law provides that once a married couple is divorced, ex-spouses lose all property rights under the will, even if the will leaves everything to the ex-spouse.

However, pensions are governed by federal law, formally known as ERISA or the Employee Retirement Income Security Act of 1974. As a result, state rules do not apply.

Pensions are not the only accounts that people tend to forget to update. Bank account Payable on Death designations are often hard to find, and circumstances may change from when you first set them up.

To ensure your wishes are carried out the way you want, work with 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, “Can My Ex Get Some of My Estate?” read also these additional articles: 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? and Does Quality of Neighborhood have an Impact on Developing Dementia?

Reference: CNBC (Jan. 9, 2022) “Your ex-spouse could inherit your money. How to avoid this and other estate-planning mistakes”

When it comes to addressing financial issues in a remarriage, couples should look at the past.  This should include the way in which each person handled finances, and their pre-marital liabilities and assets, along with the present (e.g., new benefit options) and the future. This means how they’ll handle finances as a unit or protect themselves and loved ones in case of death or divorce.

CNBC’s recent article entitled “Remarrying? Here are financial considerations to keep in mind before saying ‘I do’” says that it’s important to release any financial skeletons from the closet. Here are some smart financial moves for new parents:

It’s critical that blended families have similar talks with their children. The children were most likely brought up in different financial circumstances, so it’s important to talk as a family about new financial expectations.

After the prospective spouses identify their collective financial situation, there are a few topics to consider. For instance, if you were previously married for more than 10 years and collecting Social Security benefits on your ex-spouse’s account, you may forfeit those payments if you remarry.  Your new combined income may also result in a higher tax bill. This is sometimes called a “marriage penalty.”

Moreover, financial communication is a crucial best practice to achieve financial success in a relationship. After you remarry, look at the impact on benefits.  Also, you should always reconsider a change or modification to the beneficiary designations of your life insurance, IRAs and 401Ks.

Marriage is a recognized life event, so you may be allowed to change your insurance options outside the regular autumn time window.

In answering the question, “What Should I Know about Finances Before Getting Married Again?”, it is important that you also be aware that if you were previously divorced and getting substantially discounted insurance via the healthcare.gov exchange, when you remarry, your insurance costs may go up if your joint income goes up.

It’s also smart to consider protecting pre-marital assets that were in your name only. You should consult an experienced estate planning attorney prior to marriage. They may advise against commingling some or all assets, and suggest a trust, segregating pre-marital assets from marital assets, to protect you in the event of divorce.

Estate planning is vitally important, if you have a new family with children. These are the documents that will take care of the people you love.

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 Should I Know about Finances Before Getting Married Again?” read also these additional articles: Should I have a Discretionary Trust in My Estate Plan? and Straight Talk About Having a Will and What are my Responsibilities if I’m Named an Executor? and Do Young Adults Need Estate Planning?

Reference: CNBC (March 7, 2022) “Remarrying? Here are financial considerations to keep in mind before saying ‘I do’”

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?”

Kiplinger’s recent article entitled “What Women Should Know about Post-Divorce Tax Planning” says that managing the post-divorce tax implications involve more than just a change in filing status. When you get divorced, understanding the more subtle aspects of tax planning is an important step for women in managing your finances. Here are a few considerations to keep in mind to simplify the process.

Filing status. This is determined by your marital status as of December 31. It will change to one of two options: Single or Head of Household. If you and your ex-spouse have children, and your home will serve as their primary residence for more than half the year, you can file as Head of Household. However, if your divorce is not final during the tax year, check the filing rules in your state.

Division of property. The tax deduction for home mortgage interest and real estate taxes are a big issue during divorce. Understand who has the right to claim the deduction and accurately account for those payments. The higher standard deduction under the Tax Cuts and Jobs Act may reduce the tax benefits, if these expenses are being divided. Ownership of the home and the amounts paid for the mortgage determine who takes the tax deduction. If you share a mortgage, the deduction on your tax return should show your part of the expenses paid, with the same applied for your ex-spouse because your ex-spouse can also take deductions in proportion with the amount they are paying.

Claiming children as dependents. The separation agreement may say which parent gets to claim which child. If the divorce settlement does not say anything, the custodial parent – the parent who has primary guardianship – gets to claim the exemption. Note that while exemptions can be negotiated, child-care credits cannot. Only the custodial parent can take child-care credits.

Income and estimated tax payments. After a divorce, your income stream many be different from when you were married, especially if you get alimony and child support. There were changes to taxation of child support and alimony for divorces after 2018. Child support is non-taxable, as is alimony, at the federal level. Payments made for child support and alimony are also no longer deductible from taxable income by the payor. State tax treatment of alimony varies, so ask an experienced attorney about possibly revising your estimated state tax payments.

Dividing investments and asset allocation. Once your investments are divided, and you have your assets, you need a comprehensive understanding of your portfolio and the resulting tax implications if you make changes to your investment strategy. When reviewing investments, consider what you have saved for retirement.

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 Women Need to Know About Finances After Divorce” read these additional articles: How Do I Set Up an Estate Plan to Help Grandchild with Special Needs? and Can You Set Up a Trust After Death? and Do I Need an Attorney for Probate? and What Happens to Parents’ Debts When They Die?

Reference: Kiplinger (Feb. 10, 2022) “What Women Should Know about Post-Divorce Tax Planning”

There are exceptions in estate planning where you could unintentionally leave money to people you no longer intend to, much to the surprise of other heirs.

CNBC’s recent article “Your ex-spouse could inherit your money. How to avoid this and other estate-planning mistakes” says that the only exception where an ex-spouse could perhaps be on the receiving end of your money when you die, is if you neglect to change your beneficiaries under a retirement plan.

Louisiana law at Civil Code Article 1608(5) provides that if the person writing the will (the testator) is divorced from the legatee (aka the “heir”, in this case the ex-spouse), after the last will and testament is executed, the legacy is revoked by law unless the testator provides to the contrary.  The same provision applies revoking appointments to specific positions under the will such as an executor.

However, because pensions are governed by federal law, formally known as ERISA or the Employee Retirement Income Security Act of 1974, these state rules don’t apply.  In addition, beneficiary designations for life insurance are governed by the law of contract between the owner of the policy and the insurance company.  So La. C.C. art. 1605(5) does not apply to insurance.

As a result, if you don’t update your beneficiary designations, your ex could still inherit the money.

In addition to pensions and life insurance, people tend to forget to update their IRA and 401(k) beneficiary designations.

Bank account payable on death (POD) designations can also create issues.  If the ex-sposue is a payee on death, and your will has excluded your ex-sposue as a legatee (pursuant to La. C.C. art. 1505(5) or otherwise) and your ex-spouse receives the money from the account, your other heirs could sue your ex-spouse creating a litigation nightmare.  Read my blog post covering this issue here: What Is a POD Account? A litigation time bomb.

Some people may decide to also include friends who feel like family in their wills. They are sometimes called “unnatural bequests” because they don’t include typical beneficiaries, such as a spouse and children. This type of bequest should be prepared by an experienced estate planning attorney with specific language to make it known it wasn’t an accident.

For example, “I leave my dear friend Big Red $1 million, even though that reduces my bequests to my children, because of the wonderful and supportive friendship I have had with Red for more than five decades.”

To make certain that your wishes are carried out the way you want them to be, enlist the help of 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, “How to Avoid Giving Estate to Your Ex” read these additional articles: What are the Added Benefits in the New Medicare Advantage Plans? and IRAs and 401(k) when Spouse Dies and Update on Transfer Taxes for 2022 and How to Check the Validity of a Will

Reference: CNBC (Jan. 9, 2022) “Your ex-spouse could inherit your money. How to avoid this and other estate-planning mistakes”