You just got your final judgment and you are now officially divorced.
By Ross E. Schulman, Esquire – Master of Laws (L.L.M.), Estate Planning
Before you book the next flight out to Las Vegas to celebrate or hit the panic button, take a breath. Make sure to review the terms and provisions in your marital settlement agreement or court ordered final judgment. Too often, family lawyers do not take the time after the final judgment to meet with clients and review the next steps and the dates which assets need to be transferred to or from the other spouse. Sometimes Qualified Domestic Relations Orders (QDROs) need to be drafted and ordered to affect division of certain retirement assets or pensions. You just fought hard to acquire or preserve assets in the divorce, now is the time to protect your new estate.
The good news is you and your attorney have just identified and valued all of your assets and liabilities. Whether the divorce just put you in control of wealth that your spouse previously managed, or the divorce resulted in a significant reduction of your assets, you need to reevaluate your new estate and revisit any existing estate planning you had in place prior to the divorce. It is time to update and rethink how you will address your estate moving forward based on your new asset structure. For example, did your spouse just get the property you intended to leave to your child? How does an existing trust or will treat your ex-spouse if they are in that document? How are the terms in your existing estate plans identifying a spouse, by legal name or through use of phrasing such as “my spouse.” And will that inadvertently leave assets for a new spouse you may not have otherwise meant to, creating issues with your other family members?
Ideally, in your dissolution of marriage, you worked with your Certified Public Accountant and your Financial Advisor. In reality, your estate planning team is already in place. In the event that you have not previously addressed your estate planning, now is the ideal time to begin that conversation, while your team of professionals are already up to speed on your assets and goals.
Whether the division of assets left you with a taxable estate or not, you need to have discussions with an estate planning lawyer if you plan to regularly provide support or gifts to your children, grandchildren, favorite charity, or alma matter. The changes of your martial status will affect your ability to gift annually while avoiding that pesky gift tax! While your estate may not be taxable at today’s lifetime gift exclusion rates, it is widely anticipated that come December 31, 2025 when the current Trump tax laws are set to sunset, there may be a dramatic decrease in the amount of money you will be able to give away without incurring significant gift and estate taxes. If one of the presidential candidates has her way, the effect of your 2024 divorce would mean that while you and your spouse had the ability to give away $28 million dollars prior to the final judgment, January 1, 2026 your ability to avoid the gift and estate tax may be reduced down to $3.5 million dollars. (How much was the residence your divorce lawyer just fought for you to receive?!) Further, there is suggestion that the current 40% tax rate on your estate may skyrocket to 65% should that candidate prevail at the polls. Now may be a good time to hit that previously mentioned “panic button.”
The dissolution put you in control of your finances, which is a great thing. However, financial freedom and power comes with responsibility. Now is the time to have the discussion about how to manage your wealth and to put into place an estate plan which protects you and your loved ones in the event you become incapacitated or otherwise unable to handle your own financial affairs. You want to ensure you have either an updated will or current trust documents so that you your legacy will pass to your desired beneficiaries. You may want to have your assets available for the use and enjoyment of those beneficiaries, while still being able to protect the assets even after you pass. Your goal may simply be to avoid probate.
Based on a decade of experience practicing family law and earning a Master of Laws in Estate Planning from University of Miami’s esteemed Heckerling program, I can affirmatively state two things. First, the overwhelming majority of family lawyers do not actively practice, nor are they knowledgeable regarding estate planning issues. Second, most estate planning attorneys are not involved in the dissolution of marriage process. The result of those two statements is that far too many recently divorced couples have outdated or outright inadequate estate plans in effect following their divorce. The irony is there may never be an easier time to update or draft your documents than at this particular time in your life. Add in the significant threat of extreme changes in tax law lingering around the corner, and you see why I suggest calling your estate planning attorney before booking that celebratory flight out of town. You just fought too hard to get those assets, now it is time to put the proper estate plan in place to protect them.
About the Author
Ross E. Schulman is a highly rated family law and estate planning attorney at Woodward, Pires & Lombardo, P.A. in Naples, Florida. He is licensed to practice law in Florida and New York and is a Certified Financial Litigator (CFL™). Ross’ Juris Doctorate is from the Benjamin N. Cardozo School of Law Yeshiva University. He recently completed the University of Miami School of Law, Heckerling Graduate Program in Estate Planning, with a Master of Laws in Estate Planning LL.M.
Before becoming a lawyer, Ross worked in finance and gained strong negotiation skills while working on Wall Street. He traded financial products at Spear Leeds & Kellogg (later Goldman Sachs) and Bear Stearns. He also worked as a financial advisor at Morgan Stanley, where he gained extensive knowledge about asset classes and various financial products. Ross is highly qualified to help you handle a variety of legal issues.
Woodward, Pires & Lombardo, P.A.
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