Divorce and re-marriage can have a significant affect on the estate plan you have in place.

First and foremost, in California, an "Automatic Temporary Restraining Order" is in effect during the marriage dissolution process. This generally hinders your ability to do estate planning as the law wants to avoid changes in your financial position during the pending divorce. 

Beneficiary Designations

If you designated your ex-spouse as a beneficiary of an asset with a beneficiary designation, for example, your retirement account, this designation is automatically revoked as a result of your divorce.

It's important to remember, however, that the divorce does not revoke the designation of your ex-spouse as the beneficiary of life insurance policies. It's therefore important to take stock of all of your assets and ensure that all beneficiary designation forms are properly updated during the estate planning process.

Remarriage

If you created an estate plan while you were single and then got married, your estate planning documents may be overridden at the time of your death, if your spouse survives you.

Your surviving spouse is entitled to the "statutory share" of your probate or trust estate. More details will be provided in another post; however, just note that if you have an existing estate plan and you get married, you must take steps to ensure that your estate plan will still be enforced despite your marriage. Most often, this can be a statement in your estate planning documents which states that you intend for your estate plan to be effective even though you recently were married.

Marriage brings with it many joys, but divorce is a precipitating event that forces many people to revisit the estate planning process. If you're going through a divorce, are contemplating divorce, or have completed a divorce, it's important to see what impact it may have on your estate plan.

In California, being married can present unique challenges to the estate planning process. More detail will be provided in other posts, but here is a preview of some of the issues that couples may face:

1. If you own community property with your spouse, you may need consent before transferring  the community property to a third party.
2. If you own community property assets that will pass without probate (for example, by beneficiary designation), then you may need your spouse's consent to name a beneficiary other than your spouse.
3. You are not entitled to designate the beneficiary of your spouse's retirement plans that are protected by ERISA (401(k), 403(b), etc.). (But see point 2, above.).

Although there may be complications, there are also benefits. For example, spouses can generally rollover the retirement benefits of their predeceased spouse. In addition, any community property that is owned by a married couple will get a full step-up in cost basis after the death of one of the spouses (which may reduce income tax consequences for the surviving spouse). Property that is transferred from one spouse to the other is also excluded from property tax re-assessment.

Asset protection generally involves planning to make sure that creditors cannot reach your assets or that the creditors of your beneficiaries cannot reach the assets that you are leaving behind for them.

Although many people will use this as a buzzword to motivate people into estate planning, in my experience, these types of issues are usually very minimal or non-existent, and are more often than not, a marketing device. Moreover, many of the more complicated techniques are quite costly to implement, and too expensive for a typical client.

Finally, if you already have creditors, the options for protecting your assets may be severely limited.

Trust Provisions

One practical way to provide asset protection for your beneficiaries (for example, if you have a trust set up for your children), is to have the distributions to your beneficiary made at the discretion of an independent third party trustee. You could also incorporate a "spendthrift" provision in the beneficiary's trust to prevent him or her from transferring or borrowing against their beneficial interest in the trust.

Retirement Accounts

Some assets have inherent creditor protection. For example, retirement accounts such as 401ks and IRAs have creditor protection features that may cause them to be attractive for those who are worried about creditors. Not to mention, retirement plans generally have great tax savings benefits as well. There are, however, limits to how much one can contribute annually to retirement plans, and generally withdrawals from these accounts are limited until one reaches 59 1/2 years of age (with some exceptions).

Asset protection should be part of the conversation you have with an estate planning lawyer; however, it's only one aspect and should be put into the context of your overall family and financial situation.

Estate planning can become more complicated if you own assets outside of California or outside of the US. Among the considerations are the tax laws of those foreign jurisdictions, as well as the laws in those regions that may dictate how your assets are to be distributed after you pass away. For most, this is not a substantial problem to overcome, but it is important to be aware of the considerations.

Assets in other Jurisdictions

Other jurisdictions may not have the concept of a "trust" as we do here in California. Consequently, you may need to hire a lawyer in that particular country to understand how to appropriately plan your estate for property you may own in that country. Additionally, the laws in those countries may grant your family certain rights with respect to the property located in that country.

State Estate or Inheritance Taxes

California no longer has a "state estate tax", but other states still have such a tax. A "state estate tax" may also be referred to as an inheritance tax. Therefore, if you own property in states that have their own estate or inheritance tax, it's important to consult a lawyer in those states about how to plan appropriately.

International Tax Issues

It's important to remember that tax treatment between different countries can become even more complicated and may be affected by treaties put in place.

US tax laws are focused on making sure you are not avoiding taxes by shifting your property to other countries or by claiming property from other countries as gifts rather than income. Thus, even if you had a non-tax reason to move property to or from another country, it may have the unintended consequence of triggering tax laws.

If you own assets in multiple states and other countries, it's a good idea for you to consult with an estate planning lawyer to understand the potential issues you or your family may face.