Marriage and Estate Planning

If you aren’t married, do you need an estate plan? That depends. Estate plans look out for others after your death. Do you have anyone you want to look out for after your death? Children, siblings, parents, pets and even your favorite charity all will benefit from your having created an estate plan. Many of my clients are single. Some have children, many do not, but they still want to control where their assets go at their death.

Preparing for Marriage

What if you are preparing to get married? Choices you make now will affect your entire life, and even after your death. If you marry in one of the nine states that have community property laws, you create an opportunity to claim property you owned prior to the marriage as separate property. Utah is not one of these states, but if you marry in a community property state and then move to Utah, the status of separate property is preserved. Currently, the nine community property states are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Property, like a home you owned prior to the marriage, will remain separate property as long as you keep it in just your name. Couples that choose to combine ownership through joint deeds or joint bank accounts are changing the character of their separate property into joint marriage property. After eliminating the separate property status, there is no way to return the property to separate status.

Other than marrying in another state, another option for Utahn’s getting married is to sign a prenuptial agreement. These aren’t popular and are sometimes seen as un-romantic. For individuals with significant property, or prior children, a prenuptial agreement is highly recommended. This agreement is your last opportunity to fully control where the assets you currently own will go at your death. After marriage, there is no agreement you can sign together that will be enforced by a court. Prenuptial Agreements normally spell out on an exhibit to the agreement all of the assets you wish to keep separate. If you hide an asset and avoid reporting it, then the asset is not automatically protected by the Prenuptial Agreement.

Another option is creating a trust and placing your property in the trust prior to marriage. The form of the trust is important, as well as the property placed there prior to marriage. If you place property gained during the marriage into the trust, this is a form of co-mingling, which has the potential to defeat the protection of the trust.

Divorce:

In the case of divorce, Utah follows the rule of equity, which leaves the judge or commissioner a significant amount of leeway on how to divide property. The judge will ask what is fair and invite the parties and their attorneys to present what they think is the most appropriate division and explain why. If a couple has not been married long, the parties may argue for a return to the same property ownership status that they held when they were married.

If they have been married for decades, with only one wage earner while the other raises children and cares for the home, it may surprise some that the wage earner doesn’t automatically receive more property in return for their years of producing income. The court views the marriage like a partnership, and sees the partners as often equally investing in the marriage, even when some investments of time and effort don’t produce cash. The partnership chooses goals like raising children and then divides up the duties to accomplish that goal.

After a divorce, any gifts made to the spouse in a will or trust before the divorce are automatically severed. If a couple remarries after divorcing, any prior gifts made in a will and trust are revived, bringing them back in effect! Not everyone sees this coming, but it’s part of state code. These effects of divorce and remarriage go beyond the married couple to their family members as well. All relatives of a former spouse, that were not related to you, are also severed from the will and trust by divorce and also revived by a subsequent remarriage.

This rule also applies to all persons named to serve as personal representative, executor, trustee, conservator, agent, or guardian. Divorce automatically removes that person from your will or trust. Though this is the law, Trusts are not normally managed in court. This means that people without much experience in the law will be managing an estate, following the trust to the best of their ability. As no court is involved, sometimes people will still make gifts to individuals severed from the will or trust, or even people who no longer have authority may be serving as executor of the will or Trustee of the Trust! Someone must know that the law severing relatives exists and also want to enforce that law for it to have any effect.

On occasion, the fact that you divorced someone did not sever your positive relationship with that person’s family members. You might still want your divorced spouse’s parents to serve as guardians of your children, or a former brother in law to serve as power of attorney. After divorce, these are automatically severed, and you will need to update your estate plan accordingly to add them as heirs, guardians or administrators. Sometimes divorced couples verbally agree to leave each other or their families specific gifts or give them authority. After divorce, these agreements must be in writing. The best option is to re-write wills and trusts after divorce to make your intentions clear. You can also sign and date a subsequent agreement if you are unable to do a new will or trust, but this makes interpreting the changes more challenging for your heirs.

During Marriage:

If you are already married, and you failed to sign a Prenuptial Agreement, there are still options, but now these options are going to be chosen together between you and your spouse. One popular option is to sign a Trust together. In that new trust, you can choose who will receive which assets. The fact that both spouses signed the trust will make it effective at your death.

If someone who remarries does not sign a trust, then any gift they make, even by will, can be interrupted by a claim from the surviving spouse or by the children of the deceased person who are not children of the surviving spouse. Percentages owed to each party vary based on whether a will was signed or not. The amounts a surviving spouse can claim change annually based on schedules in state code.

I encourage all individuals in a second marriage with prior children to create a trust together. This will take the surprises out of the distribution of your estate at your death!

At Prigmore Law, we will talk with you one on one about your estate to help you determine your best options. This discussion is pressure free. Text us today at 801-410-8992 to set up your free consultation!

THIS ARTICLE DISCUSSED GENERAL PRINCIPLES OF LAW. PLEASE DO NOT TAKE ACTION BASED ON THIS ARTICLE ALONE. ONLY AN ATTORNEY CAN DISCUSS YOUR SPECIFIC SITUATION WITH YOU AND THEN HELP YOU DETERMINE YOUR BEST COURSE OF ACTION.