Two minute scenarios...
With over 40% of first marriages ending in divorce (and an even higher number of second marriages) here we focus on the consequences of a marriage break-up on your clients' estate planning .
Separated and settled but not divorced...
Clients: Ken and Judith separated 18 months ago and their property settlement has recently been finalised. However they are not yet divorced. Ken has a Will that was drawn up when he was married, leaving 50% to Judith and 50% to his children from a previous relationship.
Objective: Ken now wants 100% of his estate to go to his children. Should he wait until the divorce is finalised?
Solutions: No. If Ken dies now 50% of his estate will still pass to Judith. He should have a new Will drawn up now 'in contemplation of divorce' so that when the divorce is finalised the new Will remains fully effective.
Scenario Two... no Will
Clients: Assume the same scenario as above but Ken does not have a Will and they have common children. If Ken was to die before the divorce is finalised, his estate will be subject to intestacy laws. So in Victoria for example, Judith would get the first $100K and a third of the estate. In NSW, Judith would get all of the estate as she was also the mother of his children. Ken does not want that to happen!
Solutions: Ken needs a new Will drawn up now 'in contemplation of divorce' to reflect his wishes.
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Settled and divorced...
Clients: Peter and Vicki recently divorced and finalised their property settlement. Vicki has a Comprehensive Will with testamentary trusts in it that was drawn up when she was still married.
Objective: Vicki wants her $2m estate to go to her children. Does she need a new Will? It depends. The portion of the estate left to Peter is revoked and is passed on as if he had pre-deceased her*. So let's say she had left 50% to Peter and 50% to her children, with Peter's share to pass to her children also if he had pre-deceased her. After the divorce Peter's share will now also pass to her children. If that's how Vicki wants to leave her estate nothing needs to be done although she may need to provide for Peter in her Will to avoid a challenge.
* Except in WA where the entire Will is revoked upon divorce.
Solutions: Vicki should review her Will to see if it still meet her needs.
The message for your clients? Upon separation an estate plan needs to be reviewed. Note that even though settlement has occurred, some clients will still need to ensure their ex-spouses are provided for in their Will if they wish to avoid a challenge.
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Announcing an enhancement to our Alliance Partner model
Many of you are aware of our Alliance Partner model that allows you to be more involved in your clients' estate planning.
With a recent enhancement to the model you can now still manage the planning process but with the comfort of knowing a lawyer is available to talk to your clients about their distribution needs. If you want to know more please click here.
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