While separation among young couples is becoming less common in the United States, divorce cases among older people, also known as “gray divorce”, is rising. According to the Pew Research Center, the divorce rate for Americans aged 50 and over is about twice the numbers recorded in the 1990s. Let’s discuss how a gray divorce affects Estate Planning.
Challenges Unique to Gray Divorce
Most young couples don’t own significant assets before starting a family and achieving their career goals. Therefore, the division of property after separation is usually not that complex.
Conversely, many older couples have considerable financial assets, some real estate, and businesses. Having lived together for decades, it sometimes becomes difficult for gray divorcees to define separate property, complicating asset division.
Also, older people face a challenge in sharing retirement accounts that have grown over the years and pensions whose payments stretch into the future. They also have limited time to set new career paths and build a nest egg.
Furthermore, many gray divorcees have adult children who grew up in a single-family unit. These children sometimes side with one parent after divorce, hurting their relationship with the other. Still, adapting to a split family can be stressful.
Complications in Gray Divorce
A tragedy like death or the incapacity of one party can strike before the finalization of a gray divorce. If a spouse becomes mentally impaired during the divorce process, there may be problems in the division of assets, determining spousal elective shares, guardianship, and so forth.
Problems associated with intestacy in North Carolina can arise if a person dies without having written a Will. Such issues might necessitate a review, revision, or a complete overhaul of Estate Planning documents.
How Gray Divorce Affects Estate Planning
If you resolve to divorce, it’s in your best interest to restructure your Estate Plan and amend your last Will and Testament. Be sure to update your list of beneficiaries and choose the right person to have the Powers of Attorney for the sake of your health and financial matters. If you get married again, revise your Estate Planning documents once more to resonate with your desires at the time.
Equitable Distribution of Assets Upon Divorce
North Carolina applies equitable distribution of assets during a divorce. In other words, you share all the property you acquired during marriage equitably. However, it’s important to note that equitable distribution doesn’t mean an equal split.
Since most older couples have plenty of assets accumulated over the years, property division is often contentious. If you’re lucky enough to have an uncontested divorce, you can agree with your partner to share the property on your own with the help of a divorce attorney. That way, you can choose the most important assets to you, and your lawyer can help you fight for them.
A contested divorce often involves the court. On many occasions, couples experience incredible lifestyle changes when the judge divides assets equitably. As a result, you might not be able to afford things like college tuition for your adult children, and you may have to skip some luxuries like vacations.
If you weren’t working before, you might need to find employment. You may also have to sell your family home and downsize to a smaller home. Whether you’re undergoing a contested or uncontested divorce, consider hiring a family lawyer to help protect your interests.
Amending Your Last Will and Testaments
A Will usually declares your spouse a Beneficiary and a Personal Representative or Executor. For this reason, it’s essential to revise your Will immediately after a divorce. Leaving the documents intact can have the people who you want to have your inheritance lose it altogether.
The Living Trust in a Gray Divorce
Unlike a Will that simply states your final wishes as to what should happen to your Estate and assets upon your death, a living Trust is a legally binding document that allows you, the Trust Settlor or Grantor, to permit a Beneficiary, also called a Trustee, to assume ownership of your assets.
The Trustee is expected to manage assets placed in their trust judiciously on your behalf and that of other beneficiaries. They are also responsible for ensuring that each Beneficiary receives their share of the assets in the Trust as per your directives. A Trustee can be yourself or another person of your choice.
After you die, the person you named in your Trust document to be the Successor Trustee takes over and transfers the Trust assets to your family, friends, or charities you named as the Trust beneficiaries. Probate isn’t necessary for assets held in Trust, and in most cases, the whole thing can be handled within a few weeks.
Because the purpose of a living Trust is mainly to protect assets from Probate and get them distributed to Beneficiaries more quickly, the Trust is only useful if you put money and property into it. After a divorce (at any age), it’s important to update your Living Trust documents as necessary.
Changing Your Living Trust
Most couples choose to have a Joint Living Trust in both names. Therefore, a divorce requires the entire Estate Plan to change.
A new Estate Plan introduces the challenge of retitling all your assets into different trust names. Instead of this grueling process, it’s best for each of you to name a separate Living Trustee. You can even be the Trustees yourselves.
In this scenario, you can change the individual Trustee after divorce without altering the Trust name. Your marriage dissolution disqualifies your spouse as a beneficiary.
Spouses are free to keep a Joint Living Trust rather than each having an Individual Living Trust. What’s important is to make the necessary changes if you happen to go separate ways. Essentially, a Trust amendment only assigns new Trustees to your Trust, which is more straightforward than retitling your assets.
Powers of Attorney
Another vital consideration during a gray divorce is the Powers of Attorney since you need someone you can trust to assist you when you get older. A Power of Attorney in North Carolina can be temporary, special, or general. With a temporary POA, an agent will only act in a specific time frame. A limited or specific POA allows an agent to act only on particular powers given by the principal.
On the other hand, a general POA permits the attorney-in-fact to make personal and business-related decisions. A Durable Power of Attorney is essential because it allows an agent to make decisions such as in Estate Planning on your behalf if you become incapacitated.
Once you get divorced, set up new Powers of Attorney immediately to protect your interests in case of incapacity or emergency.
Contact Our North Carolina Estate Planning Team
Consulting with an experienced Estate Planning attorney ensures that you can put yourself in the best position possible if you’re going through a mid-life divorce. The team at McCollum Law is here and ready to help you revise your Estate Plan to help with your new priorities in life. Call us today or fill out our online form to schedule a consultation!