Estate Planning Issues after a Texas Divorce

 Posted on February 01, 2022 in Divorce

As we know, divorce brings about all sorts of complications. There are child custody issues, property division issues, emotional recovery, and plenty of others. On top of all else, newly divorced people need to deal with estate planning matters as well. When someone divorces, the newly created divorced status will lead to a host of considerations, such as estate planning issues. In this post, we will go over a few estate planning issues people will need to consider after a divorce in Texas.

Adjustments to Wills or Trusts

A will is a document which predetermines the distribution of someone's property after death. A will must be executed properly in order to be enforceable, and ultimately the will needs to be carried out by an executor. A will identifies “beneficiaries” who receive the property. Wills intersect with divorce in critical ways because certain property cannot be included in a will. When a couple divorces, the “marital property” which is jointly owned will be divided between the parties; Texas is a community property state, and so typically this means an equal division of the overall estate, taking into consideration many factors. Hence, marital property isn’t something which can be assigned or distributed through one spouse's will as though it belongs exclusively to him or her.

The marital property will be divided by the court in accordance with established principles. However, wills can include all the separate property owned by spouses. This is where spouses need to plan after a divorce: spouses need to update their will, assuming that they no longer wish to leave separate property to their partner. Spouses will commonly name their partner as the beneficiary of separate property, and so this needs to be changed if their intentions change after divorce.

Select New Beneficiaries for Other Accounts

Wills typically don’t include all the assets or property possessed by a person. In most cases, wills don’t include certain accounts, such as brokerage accounts, retirement accounts, certain bank accounts or deposit boxes, life insurance policies, and so others. For these other assets, the owners simply designate beneficiaries separately, outside of a will. Owners of these assets will need to update the beneficiary, assuming that they no longer wish to pass them on to their former spouse.

Update Power of Attorney

Power of attorney (POA) refers to an arrangement whereby one person is entrusted with the ability to manage certain aspects of another's person's affairs. For instance, often a grantor (i.e. the person who grants the ability to manage his or her affairs) will give POA to someone in order to better manage finances or healthcare. There may be a need to update POA, because often the agent with POA is related to a spouse.

Preparation for Federal Estate Taxation

Another consideration which arises following a divorce relates to federal estate taxation. As readers may know from our other article, the current exemption for federal estate taxation is $11.7 million per person. For a married couple, the exemption doubles to $23.4 million. This means that a person who divorces will need to keep this new exemption in mind and plan accordingly. If a person divorces and then goes on to accumulate enough assets to trigger the federal estate tax, this is something which needs to be taken into account.

Contact The Ramage Law Group for More Information

These are just a few of the estate planning issues which can arise following a divorce here in the State of Texas. If you’d like to learn more, please contact The Ramage Law Group today by calling 972-562-9890.