Divorce and estate planning are two legal areas that can be incredibly complicated and stressful. In some instances, these legal topics may become intertwined, which can lead to a great deal of confusion and concerns about one’s financial future. For example, someone who is going through a divorce may wonder if their status as a beneficiary in one of their family member’s estate plans will impact the way in which marital property is divided, or if their ex will be entitled to any of their inheritance. Or, someone who is creating an estate plan, such as an irrevocable trust, may be worried how their trust will be affected by a beneficiary’s divorce.
Typically, irrevocable trusts that list someone as a beneficiary are not seen as marital property when a couple splits up, especially since the inheritance is not realized because the person who created the trust is still alive. Generally speaking, this means that a beneficiary’s proceeds from an irrevocable trust are considered separate property and they are not subject to division (as opposed to marital property, which is split up). However, it is important to note that there are some exceptions and that every estate plan (as well as every divorce) is unique.
Whether you have been listed as a beneficiary in your loved one’s estate plan and you are preparing for divorce or you have questions about how a divorce could affect your loved one’s inheritance, it is crucial to review all legal topics that are relevant to your circumstances and figure out the best course of action.