In Minnesota, a divorce commences upon service of a Summons and Petition. The Summons includes a “mandatory restraining order,” ordering that neither party may dispose of any asset except: (1) for the necessities of life or for the necessary generation of income or preservation of assets; (2) by an agreement in writing; or (3) for retaining counsel to carry on or to contest the divorce. All insurance coverage must be maintained and continued without change in coverage or beneficiary designation. Your family court judge can modify these restraints, but only after a motion is filed.
Months, and sometimes years, can pass between commencement of the divorce and dissolution of the marriage. After you serve (or are served) the Summons and Petition, you are still legally married. You still owe a fiduciary duty to your spouse, even if he or she is now your “estranged spouse.” Your marriage is only dissolved by a decree of dissolution granted by a judge, either after a trial or by stipulation of the parties. Absent a revised estate plan, if you die during that period of time, your estranged spouse will likely receive a greater share of your estate than you intend. To protect yourself and your assets, you should:
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Get a New Will. Early on in your divorce, talk to your lawyer about proper estate planning. Execute a new will and revoke your old will. This is especially important if you own significant assets or wish to preserve assets for your children or for some other beneficiary. Keep in mind that until your marriage is dissolved, you cannot completely cut your spouse out of your estate though. Because you are still legally married to your spouse, he or she also has the right to a certain percentage of your estate (called the “elective share”), which your will cannot prevent. Under the elective share statute, your spouse in entitled to certain benefits and a right to a percentage of your estate, which increases over time up to half of your “augmented estate” if you die having been married fifteen years or more. This elective share can only be waived if your spouse signed a valid antenuptial agreement (commonly called a “prenup”) or a valid post-nuptial agreement. As mentioned above, you must also abide by the restraining order in the Summons and any other order issued by your family court judge. Once your marriage is dissolved, the restraining order is lifted and your spouse’s right to, among other things, the elective share automatically terminates. Also, the will you create during the divorce process is still valid and does not need to be rewritten until you want to change your estate plan again.
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Set Up a Trust for Your Children. As part of your estate planning, you can set up a trust to hold your estate assets in the event of death. There are many different kinds of trusts. But talk to your divorce lawyer before you “fund” any trust with assets during your divorce, since doing so may run afoul of the mandatory restraining order.
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Determine Who You Want to Care For Your Kids If You Die. While you can name a guardian of your children in the event you die before they become adults, if your former spouse is still alive, he or she will be the children’s guardian and your guardian designation will not matter. But if your former spouse pre-deceases you and you then die, your guardian designation will be adopted by the Court.
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Change Your Power of Attorney and Health Care Directive. It is also important to modify any power of attorney documents you have signed and to modify your health care directive. Normally, these documents are automatically revoked by commencement of the divorce, but it is important to think about revisiting your wishes and who you want to have the power to act on your behalf in the future.
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Keep in Mind Life Insurance. Think about using life insurance to fund or protect child support and spousal maintenance orders. Life insurance policies should have a death benefit sufficient to cover any child support or maintenance obligation and may even be used to cover property settlement payments or other obligations to your former spouse.
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Get Professional Help. Divorce sometimes brings great wealth to people who have no experience managing money or controlling financial resources. Appropriate professionals, such as divorce and estate planning attorneys, financial advisors, bankers, and accountants, can provide a great deal of value to newly wealthy individuals to ensure that resources are being appropriately utilized and managed.
As Benjamin Franklin said, “an ounce of prevention is worth a pound of cure.” Proper estate and financial planning, especially after a divorce is commenced, is well worth the time, effort and money.
This information is general in nature and should not be construed as tax or legal advice.