In a prior post, I discussed how to know whether you are ready for divorce and legal options short of divorce that may help resolve marital conflicts. If you decide to take the next step and separate or file for divorce, it is important to also consider whether you want to make changes to your estate planning in light of your circumstances. If you don’t act, both of you will keep your marital rights and obligations until your divorce is final, including those related to inheritance, control over assets, and financial support. Is that what you want? Here are a few matters to discuss with an estate planning attorney:
1. Wills, trusts and beneficiary designations. If you die while still married, your assets will be distributed according to the terms of your will or beneficiary designation forms for financial accounts and insurance policies. If you don’t have a will, New York intestate laws apply, which allow your surviving spouse to inherit 100 percent of your estate if you have no children or 50% of your estate plus $50,000 if you do have children. Notably, your surviving spouse also has a right of election to your estate. Your spouse can elect to receive one-third of the value of your estate even if your will states otherwise. However, that right can be waived in a prenuptial or post-nuptial agreement.
Another issue with trusts and wills is that if you named your spouse (or a relative of your spouse) a trustee or executor, those appointments would still stand if you died while still married unless you changed these documents.
2. Health care proxy and power of attorney. Whoever you named agent or representative in these legal documents has the authority to handle the designated matters regardless of whether you are getting a divorce. That means if you become incapacitated, your spouse may have the right to make health care and financial decisions on your behalf. If you don’t want this to happen, you must update these documents.
3. Medicaid planning. You and your spouse’s income and assets will be considered for purposes of determining Medicaid eligibility. A spouse can execute a spousal refusal (indicating his or her refusal to support the ill spouse). However, the county can still pursue recovery against a refusing spouse for expenses paid to the Medicaid recipient to the extent the refusing spouse has assets over the Community Spouse Resource Allowance. This is true even if you are separated and living apart.
An additional complication is that if one of you is on Medicaid and the other one dies, Medicaid will request that the surviving spouse exercise his or her right of election to receive one-third of the deceased spouse’s estate. The recipient cannot waive the right of election and if he or she refuses to exercise the right of election, Medicaid will discontinue or deny benefits.
When you separate or start the divorce process“ (but before an action is started and statutory orders are issued), it is important to update the documents mentioned above as well as other ones discussed in a prior post. Some of these may need to be revised again when or if the divorce is finalized. These issues can be complicated, so you should talk with an estate planning attorney to ensure your wishes are implemented and legally enforceable.
Contact me for a consultation.
