Taxation & Estate Planning

Estate Planning and Divorce

By michael

I’ve written here and here before on the unique challenges planners face when drafting a plan for people who are not in their first marriage.  One such challenge is advising clients whether they have any lingering rights or responsibilities from their divorce decree or another agreement that arose when their prior marriage ended.  Such decrees and judgments can have serious effects on any proposed plan and must be considered by your estate planner before signing anything.

Yesterday’s decision out of Oregon deals with a common aspect of divorce decrees when children are involved, the mandatory life insurance requirement.

In this case, decedent was required, pursuant to the terms of the stipulated judgement entry that ended the parties’ marriage, to maintain life insurance on herself – the requirement was reciprocal.  When she allowed the policy to lapse and subsequently died without such life insurance, her former spouse made a claim against her estate for the money he would have received had she not allowed her policy to lapse.  There was some discussion in this case about whether the surviving ex-spouse should be able to make such a claim given that he was the life insurance agent who issued the policy and therefore, the argument went, he should have known that the policy lapsed so he can’t now complain about his failures, but the court dismissed this argument almost out of hand and awarded the surviving ex-spouse his claim.

The point here is two-fold:  1) Pay attention to the documents that ended your prior marriage when doing planning now.  As much as you may want to, you can’t just pretend you were not previously married and, 2) Do what those documents tell you!

(As always there is a third point here:  Please, don’t try this at home!  For any planning needs, contact a qualified estate planning lawyer in your area. )

Full post as published by The Ohio Trust & Estate Blog on March 17, 2011 (boomark / email).