If you are considering a divorce, it’s critical to understand the impact of your divorce on what would happen in the event of your incapacity or death, either during the divorce or after.
Until the Final Judgment is signed by the judge, without modifications to your estate planning, the soon to be ex-spouse may still have decision making authority even though there is a divorce pending.
Unfortunately, most divorce lawyers don’t give much thought to incapacity or death, simply because they do not have training on these issues specifically and it doesn’t seem like a pressing issue when they’re advising you through your divorce. That’s why it’s important for you to seek our advice at the beginning of the divorce process.
Here are some things to keep in mind:
There are many ways to get divorced. The traditional litigation/fight oriented divorce could require years of litigation, and is a division of assets based on legal rights, rather than your specific needs and desires.
Alternatively, there is a movement today towards “conscious uncoupling” in which you and your spouse collaboratively tailor the outcome of your divorce to meet each of your specific needs and desires, as well as the overall impact on your family. With this method, instead of having a judge make all the important decisions in your divorce, you can make decisions that are right for you. This is especially helpful when dealing with alimony and if children are involved.
Alimony, also called spousal support or spousal maintenance, is financial support paid to the non-income earning spouse during the divorce proceeding and after the judgment. Alimony can be paid in a number of ways, usually it is monthly, over a predetermined period of time. Durational payments carry the benefit of a steady income for the recipient, but can be modified under certain circumstances, leaving some uncertainty. It also leaves room for continued communication about what’s needed over the non-income earners life, as well as what’s possible over the lifetime of the income earning spouse.
Because monthly payments (and a continuing relationship) aren’t right for every family, alimony can also be paid in a lump sum. This is also referred to as “alimony buyout.” Lump sum alimony either in the form of a cash buyout or a disproportionate property division is not subject to modification or termination, so it creates a finality to the relationship that isn’t there with a continuing monthly payment.
If you do decide on continuing monthly payments versus a lump sum alimony payment, it’s critical to ensure that those payments would be able to continue in the event of incapacity or death of the spouse paying alimony, and you need to follow up and confirm that those payments are considered in the ex-spouse’s estate planning documents. Life insurance can be used to guarantee that the support continues, should the unthinkable occur. If you need any recommendations for local, trusted insurance and financial advisors, let us know.
If you decide on a lump sum alimony, be sure to update your estate planning to reflect the new assets you now will have titled in your own name. We can discuss trust planning options to ensure those assets stay out of Court, if and when anything happens to you.