Couples facing divorce learn very quickly that a lot of “rules” govern their assets and debts—rules that most married couples do not know exist. The rules (called characterization rules) matter because how an asset or debt is characterized determines how that asset or debt can be divided, if at all.
In addition to learning a lot about marital property rules, divorcing couples discover that actions they took before and during their marriage may result in unintended consequences, if and when they divorce. For example spouses often complete extensive estate planning while married only to find out that a divorce may undo some of that planning or cause unintended tax consequences. Filing for divorce may actually trigger certain events—like removal of a trustee or termination of a right granted in a trust or will. In other instances, couples learn that prior estate planning cannot be undone even if the couple divorces and they no longer share the same financial goals and strategies. All these issues should be thoughtfully considered and addressed in the divorce discussion.
Because of this, it is recommended that a divorcing couple’s trust and estate lawyer be included in the conversation about divorce. The divorce lawyers and the spouses must understand the existing trust and estate plan and the impact that a divorce will have on that plan. In many instances, the parts of the estate plan spouses want to keep can be preserved post-divorce, but preservation usually needs to happen in an intentional, well-thought out way.
Family limited partnerships and other business entities created during the marriage may also impact the marital estate of a divorcing couple in similar, unintended ways. The spouses’ business lawyer should be included in the divorce conversation for this reason. Spouses may want to divide assets owned by a business entity only to find out that they will pay a hefty tax bill if they transfer ownership of an asset from the business to a spouse. Or spouses may decide to divide a partnership interest only to find out that the other partners must unanimously consent to divide the partnership interest between the spouses, or the partnership agreement prohibits divorced spouses from each owning a partnership interest.
This firm’s goal is to ensure that a client has all needed, relevant information to make well-informed, excellent decisions that will affect his or her future. Minimizing surprises and unintended outcomes allow our clients to move forward into the future with confidence.