Don’t Overlook Important Estate Planning Considerations During the Pendency of a Separation or Divorce

A recent New Jersey Appellate Division decision highlights the importance of updating your estate plan during an extended separation.  In the matter of the Estate of Pattanayak involved a dispute between the parents of Basabadatta Pattanayak and her estranged husband. The couple separated in 2012.  In 2014, they agreed to mediate the dissolution of the marriage.  Although a marital settlement agreement was signed, the decedent never executed a Will.
The lawsuit focused on the estranged husband’s right to inherit an intestate share of the estate and his ability to serve as administrator. The court removed the husband as administrator and ruled him ineligible to inherit. This ruling was affirmed on appeal.

It is of paramount importance to always have medical and financial powers of attorney and a Will in force. These estate planning documents should name qualified individuals to handle your affairs if you cannot and distribute your assets in accordance with your current objectives and legal obligations. Significant costs and delay could have been avoided in the highlighted case if basic estate planning documents were signed.

Some other estate planning considerations relevant to a client who is contemplating a separation, or who is a party to a pending divorce include:

    • there is no requirement that your spouse be named as the executor of your estate or your agent in a medical or financial power of attorney. Any prior designation of a spouse as executor or agent in these important documents can be revoked at any time.
    • although there is a spousal “elective share” statute which can create certain inheritance rights in favor of your spouse, such right can be reduced or eliminated through proper planning. For example, in New Jersey, transfers of property made more than two years before death are not considered as part of the decedent’s “augmented estate” subject to the elective share.  Note also, that the right to an elective share under New Jersey law ends when there has been a “separation from bed and board.”  In New York, the right of election is forfeited when there has been a final judgment of separation, divorce or annulment, or where there has been an abandonment or failure to provide support.
    • beneficiary designations for life insurance policies and retirement plans should be reviewed and advice should be sought from matrimonial counsel regarding the ability to change a beneficiary designation just prior to, or during the pendency of the divorce proceeding.
    • trusts which name an estranged spouse in either a fiduciary capacity or as a beneficiary should be reviewed with qualified counsel.  Action should be taken to remove and replace the spouse in accordance with the terms of the document or applicable law.