An Open Letter to ... Kristin & Jay

Dear Kristin & Jay,

Hey, listen, we get it, every relationship has its ups and downs, and sometimes divorce is the best option for the family as a whole.

While you undoubtedly have a prenuptial agreement that will determine how your assets are to be divided, there’s a good chance that it is silent as to what happens to your estates in the event that one of you dies before the divorce is finalized.  Let’s talk about that.

In most states, including Tennessee where you both live, a divorce will nullify any testamentary provision for the benefit of an ex-spouse, including the nomination of the ex-spouse as an executor or other fiduciary.  The laws of most states also revoke any beneficiary designations on securities, life insurance policies and retirement plans in favor of an ex-spouse.

However, these laws only cut off a spouse’s right to inherit when the divorce has been finalized — not while it is pending.  Which means that if either of you were to die before your divorce is finalized, the other would inherit the deceased spouse’s assets to the extent that he/she provided before filing for divorce, i.e., when you both still liked each other.  It is unlikely that either of you would want the other to inherit the bulk of your assets at this point — you probably would want them to be held in trust for your children, out of reach of your ex and any subsequent spouse he or she may have in the future.  While you cannot disinherit your spouse completely, here are some things you can do:

(1) Update your estate planning documents.

·  Remove your soon-to-be-ex and any of his/her family members as fiduciaries of your estate.  You should each remove the other executor of your estate under your Last Will and Testament, and update the trustees of the trusts for the benefit of your children as well.

·  Revoke any health care proxies and powers of attorney in favor of your soon-to-be-ex.

·  Update the guardianship provisions of your Wills.  If you no longer want your children to be raised by your ex-sister-in-law, now is the time to make the change.

·  Update beneficiary designations.  For some accounts, such as 401(k)s, you may need your spouse’s consent to remove him/her as a beneficiary, but for other accounts, such as non-retirement brokerage accounts, you can change the beneficiary to whomever you like. 

(2)  Be strategic.  In most states, including Tennessee, you cannot disinherit your spouse; even if you do not provide for each other in your Wills, the surviving spouse will still be entitled to a portion of your estate.  But there are still some things you can do to minimize your ex’s rights to your estate:

·  Joint assets often count against the portion the survivor is entitled to.  If what you own together is valued at an amount equal to or greater than what your spouse would get under the law, you can leave all assets owned in your individual name to whomever you like.

·  Cherry-pick your assets.  If you own assets that are more valuable, desirable or appreciable than others, make sure that those go to your kids and designate less desirable assets towards your spouse’s portion.

·  Waive your rights in the other’s estate.  Under Tennessee law, you cannot disinherit each other — unless one or both of you agree to be disinherited.  Depending on the balance of assets between you,   maybe you don’t care if you are disinherited by the other, especially if the deceased spouse’s assets will be held in trust for your kids anyway.

(3) Extend your plan to the next generation.  If your ex inherits your assets upon the death of one of your descendants, then you haven’t really cut him/her out of your estate plan.  For example, if a child were to post-decease you, unmarried and without children, and his/her trust provided that any property was to be distributed to his/her “next-of-kin”, then that property will end up with your ex.  Ensure that the trusts for your descendants provide that all trust funds stay in you line of descent.      

Although reality TV may be scripted, divorce is about as real as it gets.  Make sure that your divorce plan contemplates your estate plan! 

Yours truly,

Lori & Cassandra

This article represents a hypothetical for educational purposes only. Douglass Law does not purport to represent Kristin Cavalleri and/or Jay Cutler, nor does Douglass Law represent that Kristin Cavalleri and/or Jay Cutler endorses Douglass Rademacher LLP in any capacity.