Add “gray divorce” to the factors leading to strife in estate planning. Minimizing discord among beneficiaries is one of the top three reasons people decide to have estate plans created, but with more gray divorces, things become complicated.
A survey at the 54th Annual Heckerling Institute on Estate Planning conducted by TD Bank asked elder law attorneys, insurance advisors, wealth managers and other professionals what the biggest challenge to estate planning is. An article in the Clare County Review titled “Rising Gray Divorce Rates Are Making Estate Planning Problems More Complicated” explains the problem, and presents some solutions.
Gray divorce, blended families, naming heirs and changing family structures are making it more complicated—and more necessary—to create an estate plan and review it with an estate planning attorney on a regular basis.
More than a third of the 112 professionals participating in the survey said that gray divorce has the biggest impact on retirement planning and funding. It also impacts naming who becomes a person’s power of attorney and how Social Security benefits are determined.
The biggest way to help avoid family conflict in a gray divorce is the same as in any other divorce: regular communication. The family members need to know what is being planned including who will be the designated beneficiaries and who will be named as executor.
The divorce process is complicated at any age, but after 50, there are usually more assets involved. The spouse is usually listed as the beneficiary on most, if not all, assets. Each asset document must be changed to reflect the new beneficiaries. Dividing pension plans, IRAs, and other retirement funds entails more work than simply changing names on bank accounts (although that also has to happen).
Wills, trusts, life insurance, and titles on real estate must also be changed. Institutions and companies that have accounts must be contacted, with information updated and verified.
Trusts are growing in popularity as a means of leaving assets to heirs, since they can minimize costs and delays when property is transferred. Trusts make it easier to pass assets if family conflict is expected.
Even when beneficiaries aren’t expecting any cash assets to be left to them, controversies can still erupt over other assets. Adult children may not care about IRAs or trusts, but often the family home has great sentimental value. Deciding what to do with it can lead to fighting among siblings.
For those considering a gray divorce, talking with an estate planning attorney, in addition to a matrimonial attorney, could make this large life change less stressful. The estate planning attorney will be able to work with the matrimonial attorney, to ensure that estate issues are handled properly.
Reference: Clare County Review (February 10, 2020) “Rising Gray Divorce Rates Are Making Estate Planning Problems More Complicated”