Estate Planning and Grey Divorce

Posted by Sheri Tucker, M.S., J.D.May 08, 20210 Comments

We started hearing about grey divorces from the lives of politicians and celebrities.  The recent announcement by Bill and Melinda Gates  reinforced the trend of people divorcing after the age of 50 years.  It's not only the rich and famous becoming “Silver Splitters;” it's also the everyday husband and wife calling it quits.  This article focuses on how Diamond Divorces affects estate planning.  How does grey divorce complicate estate planning?  What are some solutions to consider for a grey divorce in estate planning?

Grey Divorce and Assets

Younger couples usually do not own many assets until starting a family or reaching a career goal.  On the other hand, many Grey Divorcees acquired significant financial assets, perhaps business interests, and own some type of real estate.  Couples spent decades accumulating assets and probably raising a family.  When Seniors divorce, retirement plans reflect more investment and value.  Insurance policies, social security benefits, tangible personal property, even health insurance is part of a division of assets.  The marital home may be the largest asset and how to handle ownership, selling, and tax issues is part of estate planning. Spouses may not have equal financial independence; therefore, it is important to divide the assets appropriately for a grey divorce.  It's also important to protect them with the right estate plan.

Grey Divorce Complications

Many couples insist that their marriage will be a forever “till death do us part.” The reality is that most end in divorce.  Two points of crisis affect estate planning: family conflicts and tax law changes.  Currently, grey divorce adds another layer of complexity to estate planning.  The grey divorce trend doubled since 2010 with one in four Seniors divorcing.  67% percent of those who divorce between ages 55 and 64 years remarry. 

What happens if catastrophe strikes during the divorce process?  It is not unheard of or unusual that death or incapacity strikes before a grey divorce is finalized.  Diminished capacity may become an issue in divorce.  Sometimes people mistakenly believe that a divorce is necessary to qualify for Medicaid (but that's for another article).  Does the spouse proceed with the divorce?  Incapacity of a spouse during the process results in questions about spousal elective shares, division of assets, guardianship, conservatorship, or maybe even intestacy issues.  Grey divorce brings emotional trauma or even financial difficulties.  In addition, it means reviewing, revising, or completely overhauling estate planning documents.

Diamond Divorce Estate Planning

The Grey Divorce trend mandates revisions and changes.  Divorce, and even a remarriage, means changes in last wills and testaments, trusts and powers of attorney.  The Diamond Divorcee needs an update in estate planning.  How does the divorce affect estate plans?

Changing your Last Will and Testament

A last will usually names the spouse as an executor or personal representative and as a beneficiary.  One needs to check state laws about divorce and your Will.  In Missouri, the ex-spouse is disqualified from inheriting but keeps the rest of the will intact.  A codicil may remain necessary to name a new executor.  Some states may not have that automatic safeguard in place.  Regardless, it's best to update your Last Will and Testament upon a divorce.  

The Living Trust Issue

Often, couples insist on having a joint living trust in both names.  Upon a divorce, the entire estate plan requires changing.  A new estate plan brings the woes of retitling all assets into new trust names.  One solution is for each spouse to name an individual living trust with an option for both spouses to be trustees.  If divorce happens, the individual trust is amended to reflect a Trustee change, but the trust name remains intact.  Instead of John and Jane Smith Trustees of the John and Jane Smith Living Trust, the trust is John and Jane Smith Trustees of the John Smith Living Trust (or Jane Smith Living Trust for the other spouse). The divorce disqualifies the spouse as a beneficiary, but changes remain necessary in other areas.

A trust amendment changes the Trustees of your individual trust, which is simpler than retitling assets.  A house may be titled in both trust names.  It means an extra step at the death of the spouse, but it is much easier to divide at divorce.  What about preserving the estate for descendants?  Each individual trust can include a Common Trust for children and even divided into an irrevocable family trust.  If a professional created a Qualified Spousal Trust (QST) in Missouri, that type of trust ends at divorce and death.

Powers of Attorney

Financial power of attorney names a conservator over assets.  The health care power of attorney names a guardian over a person.  They are very effective estate planning documents.  Both documents provide powers to help in case of incapacity.  Usually, the spouse is the attorney-in-fact.  Attorneys who work with Seniors and focus on estate planning, provide a safety measure that disqualifies an ex-spouse but keeps the power of attorneys in place.  However, it is all about how the estate plan is created.  The Diamond Divorcee may face an incredible challenge.  If there are no children who are trusted, then who will be a person to step in.  Single seniors should not delay setting up new powers of attorney and making sure he or she is protected in case of emergency or incapacity.

Your Estate Planning Attorney

We don't like to dwell on unpleasant what ifs?  Death is certain, divorce is a maybe.  Still, good planning now, saves a different heartache pain if grey divorce happens. Updating an estate plan as a single Senior, remarrying with a blended family, or planning for incapacity is a crucial step to take for peace of mind.  It's essential to work with an estate planning attorney who understands your new life change and challenges in your senior years during a grey divorce.  I am your personal care estate planning attorney.  For a complimentary consultation, call me at 314-332-0011 or book an appointment now.