Divorcing is a time of significant change for a family whether the process is amicable or contentious. It is a time when your new family circumstances must be evaluated and your new goals identified. Who will make decisions for you if you become temporarily or permanently disabled? Who will care for your children and manage your assets on their behalf in the event of your death? If you don’t consider and plan for these circumstances, you may be giving your ex-spouse far more control than you are comfortable with. Read on to see what planning is recommended for divorcing couples.
Under this document, you appoint an agent to act on your behalf in situations where you are incapacitated either temporarily or permanently. The document will express your preferences in regard to organ donation and life support, which will serve as a guide to the appointed agent. Medical doctors and hospitals will look to the appointed agent to make decisions concerning medical treatment and care. Every adult should have a current Power of Attorney for Healthcare.
Under this document, you appoint an agent to act on your behalf in situations where you are incapacitated either temporarily or permanently. The agent will be able to pay your bills, manage your finances, investments, real estate and other property on your behalf. The powers can be as broad or limited as you are comfortable with. Every adult should have a current Power of Attorney for Property.
If something happens to you and the other parent is not able at the time, who will take care of your children? What will happen to your property? Leaving guardianship unplanned and minor children as direct beneficiaries of your assets can have the unintended result of putting your assets and property under the control of your former spouse. A Will allows you to choose the person(s) that will continue raising your children to adulthood. Adding a contingent trust to your simple Will can ensure that your assets are properly managed for the benefit of your children.
This is also often referred to as a “living” trust or a “grantor” trust. Unlike a contingent trust which is created upon the death of the maker, a revocable trust exists at the time it is executed. The trust will own the assets contributed to it, although you will have full control over the property during your lifetime. This planning tool will provide for you during your lifetime, including during any period of disability, as well as allow you to plan for your children and grandchildren after your death. The trust can have specific provisions for how funds will be used for the benefit and support of your children according to your wishes and the terms of a Marital Settlement Agreement, Joint Parenting Agreement and/or Judgment for Dissolution. There are many other planning benefits depending on your particular situation. A properly funded trust will mean that your estate will not need to be administered pursuant to a court probate proceeding.
An irrevocable trust generally cannot be changed once it is executed. The grantor must relinquish control of the assets. The most common reason for parents to create this type of trust is to hold a life insurance policy. This is an excellent tool to secure maintenance and child support obligations in a divorce situation. Doing so removes the proceeds of the policy from the grantor’s taxable estate and ensures that the policy will not be changed or cancelled during the term of the trust. The trust allows the proceeds to be managed for the support of the former spouse and/or children depending on the terms of the Martial Settlement Agreement, Joint Parenting Agreement and/or Judgment for Dissolution.
If your ex-spouse is the primary beneficiary of your accounts and insurance policies, you likely want to change the designation. It is not a good idea to name your minor children as direct or contingent beneficiaries of your life insurance, retirement plans, stocks, investments, real estate or any other accounts or property. Doing so may have the unintended consequence of an outright and immediate distribution of funds to a child in the event of your passing, or if the child is a minor, the former spouse may have control of the funds. A trust is recommended to manage the proceeds to support and benefit the child during his or her minority and schooling, in accordance with the contribution terms of the Martial Settlement Agreement, Joint Parenting Agreement and/or Judgment for Dissolution.
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Semmelman & Wisneski, Ltd. serves clients in Illinois such as Lake Bluff, Lake Forest, Libertyville, Vernon Hills, Highland Park, Mundelein, Gurnee, Grayslake, Wadsworth, Ingleside, Antioch, Wauconda, Lake Zurich and the rest of Lake County.
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