Estate planning can be complex and seem a daunting prospect but what it boils down to is ensuring the ones you love are taken care of. When you go through a big change in your life, such as a divorce or remarriage, make sure you take the time to set your estate in order.
Divorce and estate planning
While divorce can be an emotionally difficult time for all involved, it is important to consider the effects it has on estate planning. Neither party enters into marriage with it expecting it to end in divorce. Unfortunately, the Office of National Statistics estimates that up to 42% of marriages in England and Wales will end this way.
In a first marriage, the estate planning of the couple is often focused on taking care of each other in the event that one should die. This should ensure that the surviving partner is taken care of for the remainder of their lives. Indeed, it is common that in the event of a death all assets are transferred to the surviving partner. When they die, the estate is often divided between any children the couple may have had.
This relatively simple structure is disrupted in the event of a divorce and it is important to review — and potentially amend — all estate planning documents when a marriage comes to an end.
This relatively simple structure is disrupted in the event of a divorce and it is important to review — and potentially amend — all estate planning documents when a marriage comes to an end.
After a divorce you may decide to disinherit your ex-husband or wife. Whilst this may sound like an inappropriate thing to be thinking about in the aftermath of a breakup it is important to protect your estate. This process can often be amicable and each partner will split their joint assets and disinherit the other from their now individual estates.
Remarriage and estate planning
If you decide to remarry, just as when getting divorced, reviewing your estate plans is extremely important. A second marriage can bring with it complications for estate planning: maybe you have children from a previous relationship, or perhaps your new spouse also has children from a first marriage. Add into this the prospect of having children together with your second partner and the situation can become very complicated.
In this situation, it is likely that you would want to provide for your new wife or husband in the event of your death. However, if you leave all of your assets to your new spouse, they are then entitled to use them as they wish. This may lead to children from a former marriage losing out on any inheritance you had set aside for them.
It is important in this situation to amend your estate documents such that both your new partner and your children are protected.
If you leave all of your assets to your new spouse, they are entitled to use them as they wish. This may lead to children from a former marriage losing out on inheritance you had set aside for them.
Even if you and your second partner do not have any children, you may both bring a greater amount of assets to the relationship and this needs to be taken into account. In this situation, you may decide to keep your assets separate from one another and to maintain separate estates.
One option for the complex task of managing an estate with multiple beneficiaries is to place your inheritance in a trust. Trusts can be structured in such as way as to distribute money to your spouse and children in the amounts you specify. This is particularly useful in ensuring all of those you care about are treated fairly in the event of your death.
How does divorce and remarriages affect life insurance?
When planning your estate, it is important to think about those assets that are not immediately obvious. While your first thought may be towards the assets tied up in your house or savings, policies such as life insurance also form part of your estate.
Life insurance policies are especially important to review when getting divorced or remarried. The beneficiary to your life insurance policy may have originally been your first wife or husband. When you remarry, you will likely want to change this to your new partner and may even want to include your children as beneficiaries also.
Our free guide to financial planning can help
A financial planner can help you to take all these points into consideration. In addition to advising you on the best course of action, they can assist you with making the right decisions, securing your estate and your family.
