Death After Divorce – Necessary Steps to Take During Divorce to Safeguard Your Family’s Future

Life is unpredictable—unfortunately, so. You never know when and how something tragic might happen to you or your spouse. Though Divorce might take up most of your time in the present, it is important to consider the far future and consider what your family’s life will look like after death. Read on to learn more about: 

  • Divorce and Wills: How Inheritance Splits During a Divorce; 
  • The Use of a Trust and How it Might Hurt or Help You; and 
  • Finding a Way for Life Insurance Policies to Help the People Who Matter Most.

 

The Way of the Will: Knowing Where Inheritance Goes Post-Divorce

There are two sides to how Maryland law covers inheritance in property distribution. 

On the one hand: Maryland is an ‘equitable distribution’ state, meaning all marital assets are divided fairly between spouses based on the facts presented by both sides. All marital property—property acquired during the marriage—usually falls under the purview of this principle; with inheritance, though, it depends. 

In the event you received a monetary inheritance and deposited it into your own bank account and did not spend any of it on any marital property, it may not be considered marital property.

However, if you do put those funds in your own personal account and do use the account as you would normally do, they would most likely be considered commingling of funds. You cannot prove what money in the account was inherited and what was your own personal funds; what portion of the used funds was inherited and what portion was not. , which is why it would still be considered commingling.The best thing to do would be to open a whole new account where the only thing in it is the money from the inheritance.

 

On the other: commingling an inheritance is the opposite scenario. Instead of depositing a monetary inheritance into a sole ownership bank account, you deposit it into a shared account with your spouse. Obviously, commingling may occur in other ways, too; however, the general principle is if you use inheritance to purchase what becomes marital property, you have commingled the inheritance. 

There are situations and circumstances where, if you can show proof of it, any commingled funds or property may be deemed separate property. Bring up any assets of note with your lawyer when heading into the Discovery phase of the divorce process. A passionate and experienced family lawyer knows that holding onto a property that is yours is of the utmost importance. 

In the case of your own Will, you can change it anytime you would like with the help of a lawyer. Some may rather not leave anything to their former spouses and instead put all of it towards their children. Take this into consideration as you enter the divorce process. If you would instead leave your assets with someone you want to have and use them, make the necessary alterations as soon as possible. 

 

What Are Trusts and How Can I Secure Them? 

Trusts involve the transfer of an estate from one-to-another. Typically, leaving Trusts in place of Wills offers more protections for its contents. If a couple sets up a Trust for their children, they might include in that trust real estate, vehicles, bank accounts, investments, or even businesses. Some might even hold the sum of a Trust until a child or children are old enough to inherit it. In many cases, the couple who set up the Trust still maintains part-ownership of the assets through signing themselves as co-trustees. 

However, if that same couple enters the divorce process, they might need to re-evaluate the Trust’s setup. 

First, never try and hide assets in a Trust. Hiding assets is never a good look on your part entering the divorce process. Your spouse may make a claim to any commingled assets that are part of your Trust as marital property rather than separate. Also, opening a Trust under your name with assets purchased during the divorce doesn’t mean you have magically made them separate property. 

At the same time, your own Trusts containing your own separate, non-marital property are separate property and would not be subject to distribution. 

In Irrevocable Trusts, all property entered becomes property of the Trust rather than the person putting them there. This property remains until the ‘grantor’ of the Trust dies, and the contents are distributed to any beneficiaries. Some provisions in place allow Trustees and beneficiaries to make small changes to parts of the agreement—generally, though irrevocable, means irrevocable. 

That also means that if you include your spouse as a beneficiary of an Irrevocable Trust, they will stay the beneficiary. 

 

Life Insurance Benefits: Who Sees What? 

Along with the last Will and Testament, you will also want to take a look at your life insurance policy. 

Like your own Will, life insurance benefits might be an asset you would want to end up with your children over your ex-spouse. There are some factors you’ll have to take into account when entering separation. 

On every life insurance policy, you list a primary beneficiary of benefits. If your spouse is your primary beneficiary and your policy is revocable, you may want to look into changing that. Designating a child as first-in-line to receive any future benefits might be your favored option. 

At the same time, make sure to leave your children with something to support them in the unfortunate situation you die. Your divorce might involve your former spouse being completely out-of-the-picture come finalization. Make sure, at the very least, your insurance policy can sustain them until the age of 18. 

 

However, if your ex-spouse remains in the picture, you could consider keeping the policy in place to help raise your children until they reach adulthood. Depending on the amount, life insurance amounts might be enough to supplement alimony or child support should your ex-spouse die. 

You also always have the option of ‘cashing out’ of your life insurance policy and splitting the cash value with your spouse. Part of your net worth as a couple comes from this cash value; when dividing assets, this policy’s value will be split evenly between both spouses. 

There are also additional considerations, like paying premiums, how big you want the insurance package to be, and whether a stepparent might need to have a life insurance policy, too. Be sure to have these conversations with either your spouse (if the divorce is more amicable) or your lawyer if you need any advice on how to separate benefits. 

If you have any questions about how to secure assets for your family post-divorce, contact our office for a free initial consultation. We are here to help provide you the most personal representation possible that cares both about your personal, hard-earned assets and family’s future.

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