Divorce can be a big factor to account for when estate planning and writing your Will. Whether you or your children are facing a divorce, or you just want to take certain precautions to protect your assets, it is worth being aware of how divorce can affect your estate planning.
How Can Divorce Affect Your Will?
Marriage revokes all previous Wills you may have written, but divorce does not have the same effect. Your Will remains valid if you divorce your partner and your ex-spouse will not be able to benefit from it or act as an executor or trustee. Instead, it is treated as though your former partner has passed away, which can have a significant effect on your estate.
If you have not made provisions for your partner’s death in your estate plan already or do not update your Will after divorce, your estate could fall to the rules of intestacy. Even though you have a Will in place, without provisions stating where assets should go in case of your partner’s death, they could be distributed to people you didn’t originally name.
It is a common misconception that an old Will made before your marriage comes back into effect when you divorce. It is important that you don’t rely on this, as it means that part of your estate could again fall under the rules of intestacy.
Many people choose to make a new Will entirely after their divorce. A new Will allows you to redistribute your assets how you like without relying on the rules of intestacy. You can also utilise trusts to provide for your new partner and children, reducing the risk of sideways disinheritance in the future. If you are planning to remarry again, creating a new Will in contemplation of marriage means that it will not be revoked when you marry.
Can An Ex-Spouse Claim on Your Estate?
It is possible that an ex-partner could make a claim on your estate if they can prove that they were being financially maintained by you. For example, if you are paying them maintenance after your divorce, they may claim on your estate if they are left out of the Will.
However, if you are worried about your ex-spouse claiming on your estate, there are some measures that you can take to avoid a dispute. A financial settlement order, or clean break order, is an agreement that neither person has financial ties to the other after a divorce. This can reduce the risk of a claim being made on your estate after you pass away, but it may not be suitable for everyone. If you have children with your ex-partner who still need to be provided for, this can make things more challenging.
Trusts can also protect your estate from claims from an ex-partner. A family protection trust ring fences your assets and makes it more challenging for someone to raise a dispute. Alternatively, you may look into making a token gift to your ex-partner, as well as providing a letter detailing why they have been left out, although this is not an obligation.
Divorce and Children
It can be a worry if you feel your child’s partner or spouse is not trustworthy. If you are leaving a big legacy to your child, there are many steps you can take to protect it from their spouse in case of a future divorce:
- Loan agreements – this type of agreement states that any monetary gifts are a loan and lays out when repayments are expected. This can protect any contributions that you make to your children’s finances but does not protect your child’s inheritance as a whole. However, it is useful if you want to help your child financially now.
- Skipping a generation – rather than leaving assets to your child, you may choose to skip a generation and leave them to your grandchildren instead. While this does protect assets from your child’s spouse, it does not protect them from your grandchildren’s future spouses.
- Trusts – trusts are often the best way to keep your assets within the family and ring-fence them in case of divorce. Combined with a strong Will, trusts safeguard any assets you choose to place into them and lie outside of your estate, so they will not be counted when calculating Inheritance Tax. Assets in the trust are also protected from divorce and are not counted as matrimonial assets to be split between partners when they are separating.
- Bloodline Wills – a bloodline Will ensures that only your direct descendants, such as children or grandchildren, can inherit your assets. While this can be done with a normal Will, a bloodline Will adds extra protection as the assets are held within a trust and managed by trustees. This type of Will also does not limit you from leaving assets to friends, your partner, and any step-children you may have. However, it still protects your assets from being claimed by your child’s partner if they happen to divorce.
There are many ways to protect your assets from divorce, whether that is your divorce or that of your children. Trusts and Wills provide a layer of protection that ensures there is a lower risk of people you do not want inheriting or taking your assets. This means you can pass on more of your legacy to loved ones.
Contact The Planning Bee today for more advice and guidance on divorce-proofing your estate planning. Our paralegals can help you establish trust and create a Will that will give you greater peace of mind for the future.