Is Your Ex-spouse still a Named Beneficiary Under Your Insurance Policy?

A client called to ask me a question for one of her customers. The customer's ex-wife died. They had been divorced for several years and, as of the date of her death, the children were still minors. The ex-husband "alleged" that it was his ex-wife's intent not to change her life insurance policy. However, the insurance company refused to issue the $250,000 death benefits to the ex-husband.

The question asked was whether the insurance company was correct in not releasing the check to the ex-husband. Well, I pondered the question. The policy is a contract between the insurance company and the insured, now deceased. She named her beneficiary and never changed it even well after the divorce. However, you have to also consider case law and any statutes that might change the basic contract analysis.

ANSWER: The Ex does NOT get the $250,000.
STATUTE: A statute in PA provides that if an ex-spouse is still named as a beneficiary under a life insurance policy upon the death of the other ex-spouse then such ex-spouse will not be entitled to the death benefits. There would have to be CLEAR intent (ie. provided in the divorce decree) that the deceased person intended for the ex-spouse to receive such death benefits.

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Estate Planning Mistakes - Number Sixteen

Do not forget to make sure your documents address Divorce. Pennsylvania law provides that if you are divorces after making a Will any provision in the Will favoring or relating to the former spouse becomes ineffective for all puposes unless it appears from the wording in the Will that the provision was intended to survive the divorce. Just to be sure, it is even better to be proactive and change your Will when you get a divorce.

Furthermore, if you have any irrevocable documents, the law does not change those provisions upon divorce. Therefore, it is imperative that your irrevocable documents address divorce in the document when the document is drafted.

Make sure you have expert estate planning advice. Contact us at http://www.ythlaw.com/

Divorce or Marriage

Whether you are getting a divorce or you are getting married, you need to have your wills done or updated upon the occurrence of either event.

I have had situations where the only will in effect was the one written before the divorce. Naming a prior spouse can be problematic upon death. Was the intent to provide for the person or the "spouse"? The prior spouse could allege that no change was made because there was still an interest by the divorcing spouse to leave the prior spouse assets upon death. The person in the best position to address the issue is now deceased.

Take care of those important matters when your life circumstances changes. Doing a will or updating one is one of those important matters to address.

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Irrevocable Trust - When to Use

The Irrevocable Trust is an asset protection vehicle because it can protect your assets from creditors, bankrupty, divorce and nursing home costs. However, there is a 5 year look back period when applying for medicaid to cover nursing home costs.

Further, you must be cautious when placing anything in an Irrevocable Trust. If others can not reach the assets in the trust, neither can you. You can not change the terms of the trust or terminate the trust in order to retrieve the assets placed into the trust. You have to treat the trust assets as though you no longer own them because you no longer own them.

Consult with an estate planning attorney if you think that the Irrevocable Trust serves your interest. Leave your comments here or contact us at http://www.ythlaw.com/

Updating Your Will

Life if funny you know. It has a way of bringing you such great joy and at other times such overwhelming pain. But, through it all we keep on doing what we need to do. I had clients who came in to have their estate planning done when there was much to celebrate in their life; successful job, great kids. Within two years they were back to update their documents because the husband, not yet 60,was diagnosed with Alzheimer's. Changing life circumstances represent a time to review and possibly update your will and other estate planning documents. Other considerations for updating your will and other estate planning documents include:
(1) Moving to another state
(2) Marriage
(3) Birth of a child
(4) Divorce
(5) Death of a loved one
(6) Disability
(7) An Inheritance

We are here to assist you. Leave your comments or contact us at www.ythlaw.com

What rights will the Prenuptial Agreement affect?

Question:
What rights will the Prenuptial Agreement affect?

Answer:
The scope of a Prenuptial Agreement can be as broad or as limited as the situation dictates or you and your fiancé desire. It can deal with just one asset or it can fix all of the rights arising out of the marital relationship.

For example, upon divorce in Pennsylvania either spouse may request that their marital property be divided between them. Rather than leave such a decision to the court or even to a negotiation process between the divorcing couple's attorneys, the parties themselves could agree prior to marriage on how their assets will be divided in the event of a divorce. Similarly, an agreement can fix their respective rights to alimony or support in the event of a divorce or separation. In both cases, the agreement avoids a protracted battle in the event the marriage ends in divorce.

Let's say your interest is to have your children inherit your property. Without a Prenuptial Agreement, your new husband would have certain rights to at least a portion of your property. With an agreement, however, you can ensure that your children will receive their inheritance.

As relates to your rights the following is important:
1. You and your fiancé should make full and complete disclosure of your financial worth. You should never waive your rights without full knowledge of what you are giving up.
2. You and your fiancé should each have an attorney. Your attorney can review the terms for reasonableness.

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Should I have a Prenuptial Agreement?

Question:
I am getting married this summer. It is a second marriage for both of us and we both have children from our prior marriages. My fiancé had his attorney draft a Prenuptial Agreement for us to execute. I am in favor of the agreement to protect my children’s inheritance. However, I want to make sure I understand the future ramifications. Should I also hire an attorney? What rights will the agreement affect?
Should I also hire an attorney prior to executing a Prenuptial Agreement?

Answer:
Yes!!!!!!!
The purpose of the agreement is to alter the rights that you would otherwise have upon divorce or death of your spouse. Your attorney will focus on the rights that you give up, will make sure you understand the terms of the agreement and, if necessary, will amend the proposed agreement (or draft a new one) to address your concerns.

It used to be that only those with vast fortunes to protect considered a Prenuptial Agreement as part of their wedding plans. Even though such steps may not be necessary for every couple, in light of the ever-increasing divorce rate and more common second and third marriages, many couples, like yourself, readily welcome the suggestion of a Prenuptial Agreement, especially to protect the interests of their children from a prior marriage.

More on Prenuptial Agreements tomorrow.

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Transfer Your Deed

Let's say you have a home and you want to leave it to your children. What would be the best way to leave your home to them? This third option (Life Estate and Irrevocable Trust were options discussed the last 2 days) would have you transfer all your interest to your children now while you continue to reside in the home.

Pros of Deed Transfer
(1) If you should need medical assistance in the future, the home would not be subject to recovery by the state since ownership was transferred out of your name to your children. If your deed was transferred to the children (without fair market consideration, ie it was gifted to them) within 5 years of you having to go into a nursing your eligibility for medicaid will be affected.
(2) Upon your death, your children would not have to pay an inheritance tax since they are already owners of the property.
(3) If your home was your only asset then there would be no need to probate your estate.

Cons of Deed Transfer
(1) Since you no longer own the property, you would have to have an agreement from your children that you may live in the house for as long as you like.
(2) If your children have issues with creditors, divorce or bankruptcy, the home is exposed to those issues. You could find yourself evicted by new owners.
(3) Your children would not have the advantage of a "step-up" basis of the property which one receives when they inherit property. Their basis would be the same as yours which is the value of the home at the time of your purchase. This could result in significant capital gain tax upon the sale by your children.

A deed transfer is ideal when: (1) you are well into retirement, late 70s into your 80s and beyond (2) your property is not income producing (3) you want to avoid the inheritance tax and (4) your children do not have issues that might put your home at risk; and (5) there would be no issues with a long term lease from your children.

Consult with our office if you would like to learn more about this estate planning technique.

Three (3) options to consider when transferring your home to your children

I grew up in Salisbury, Maryland and my parents still live in the home that we moved to when I was 12 years old. My parents were my first estate planning clients. They often revisit their plan with me to keep it up to date with changing times. They had a question about one thing recently which is often a question posed by many of my clients. As we get older, how should we hold the deed to our property? For many people, their home is their most valuable asset especially in an economy that is kinder then the one we currently face. The answer to this question depends upon your specific circumstances. The 3 primary options that could be considered are as follows:
Option 1. Add your children's name to your deed.
Issue - You expose your home to any issues that your children may have with creditors, banruptcy, divorce, etc.
Option 2. Maintain a life estate with the remainder interest to your children.
Issue - Children take your basis (for tax purposes) in the property and not the step-up in basis received when the property is inherited. This also is an issue in Option 1. and Option 2.
Option 3. Transfer the deed to your children, removing your names as owners.
Issues - All of the issues noted in option 1 and 2. Further, if you are transferring property to avoid nursing home costs, such transfer has to occur 5 years prior to the need to go in the nursing home.

There are other options that you could also consider from not doing anything to transferring the deed into the name of a trust, revocable or irrevocable both of which have their own issues to consider in your particular circumstances. Feel free to ask me a question through the comment section or call my office for a free consultation making reference to this blog entry.

The SEVENTH of TEN reasons to have a will

SEVENTH, a will protects your assets from creditors. Any property that you leave your heirs can be protected from bankruptcy, lawsuits, divorce settlement and other creditors by creating a trust in your will. Dynasties have been established this way. Small estates can grow without being subject to the claims of creditors of your heirs. Your money benefits only those you want to benefit. It's your money and you are in control if you plan!!!