Minor Children and Estate Planning in Divorce

In our last post, we looked at how a couple with a complicated estate and grown children could incorporate estate planning into their divorce mediation. In this post, we will look at how a couple with minor children and a simpler estate can consider both estate planning and educational planning as they attempt to settle their divorce.

Deena and Greg have three children, ages 22, 14 and 12. Both parents have similar incomes and plan to share parenting time of the two younger children equally. They are not, therefore, particularly concerned about child support. They are, however, interested in planning for 14-year-old Brian’s and 12-year-old Lindsey’s future education expenses. 22-year-old Molly has already completed college with very little student debt, and they would like Brian and Lindsey to be able to do the same someday. They also have a special concern for Lindsey, who has a visual impairment resulting from premature birth.

Neither Deena nor Greg has any kind of estate plan. Their only substantial assets are a marital home, which they plan to sell, and their retirement accounts, which they fortunately have funded well up to this point. Greg has a traditional IRA and Deena has a 401k. They are concerned not only with their children’s educations, but also their long-term futures, and they are wondering what would happen to these accounts if either of them was to pass away after their divorce. They decide to talk about estate planning first, and then consider how to address educational planning.

Estate Planning Basics

Greg and Deena’s mediator is an experienced family law attorney who also handles estate matters. She advises them that some aspects of estate planning can be coordinated with marital settlement negotiations, while others cannot. She outlines some of the basics for them, including the following:

Intestacy Laws

Once their divorce is final, they will no longer automatically inherit anything from each other under New Jersey intestacy laws. They will also cease to be the beneficiaries of each other’s retirement accounts.

Minor Children and Inheritances

If they do not make separate estate plans after the divorce, and either of them passes away without remarrying, then the children would inherit everything from that parent. Because minors cannot be direct beneficiaries of assets (including so-called “non-probate” assets like retirement accounts), the other parent, as legal guardian, would manage funds for any child still under the age of 18. If the other parent is no longer living, the court would appoint a guardian.

Remarriage

If Deena remarries, her new spouse will automatically become her 401k account beneficiary unless the spouse signs a waiver. This is not something that Greg and Deena can provide for in a Marital Settlement Agreement as it requires the future consent of a third party. This automatic rule does not apply to IRA’s. If Greg remarries, he can continue to designate the children as beneficiaries.

Wills and Guardianship Designations for Minor Children

Wills would not apply to non-probate assets but would allow Deena and Greg to direct distribution of other assets as well as to designate alternate guardians for Brian and Lindsey in the event that the other parent predeceases them.

Living or Testamentary Trusts

Greg and Deena can also consider establishing one or more trusts for the benefit of the children. Either a living trust, or a testamentary trust established under a will, might be appropriate. Trusts have designated administrators (trustees) who manage trust assets for beneficiaries. A trustee could disburse assets to the children periodically. Trusts can also protect assets from creditors. This can be helpful for parents with minor or young adult children and critical for parents with special needs children. Special needs trusts can protect social security disability payments and provide support to a disabled child or adult. It is possible to name a trust as the beneficiary of a retirement account. It is important, however, to first understand the full financial ramifications of such a decision. Both a financial advisor and a trusts and estates attorney can be helpful in this regard.

Life Insurance to Protect Minor Children

Either or both parents can also take out life insurance policies for the children. Life insurance can protect children from potential loss of a parent’s support. This is one of the simplest and most popular options for estate planning during divorce.

Coordinating Estate Planning with Educational Planning for Minor Children

Deena and Greg feel that in their case, estate planning must be intertwined with educational planning for Brian and Lindsey. They therefore decide to move on to discussing educational issues before making any decisions. As their mediator has told them, there are circumstances under which divorced parents in New Jersey may be held responsible for funding post high school education for children. Divorce mediation is therefore a good forum for them to work out any disagreements about future plans. Courts tend to uphold agreements between parents about college education contributions, as long as they are specific and clear. The wording of an agreement is integral to its enforcement, so attorney review before finalization is critical. In our next post, we will look at some of things Greg and Deena will want to keep in mind.

If you and your spouse or former spouse would like to discuss either estate planning or educational planning in divorce with one of our experienced family mediators now, take advantage of our free consultation and contact us today.

Estate Planning in Divorce Mediation

Couples going through divorce mediation often wish to consider financial matters beyond immediate spousal or child support and property division. Two issues that commonly come up are college planning and estate planning. Not only can such issues impact divorce negotiations, but many divorcing couples are approaching them for the first time and will benefit from the support of a mediator during the process. Even if you already have an estate plan, you will generally need to revise it during divorce. Read more

Beyond Child Support: Educational and Estate Planning in Divorce Mediation

estate planning and divorce mediation

Deena and Greg, who are both in their forties, have recently decided to divorce. They are on good terms with each other, and they believe that they could resolve all of their issues amicably in divorce mediation. They are planning to meet with a mediator together before consulting with separate attorneys. One major concern is bothering them though. How can they plan financially for their children’s futures? Read more

Reducing Conflict in Mediation by Leaving Blame Behind

The New Year is finally here, and many people are more than ready for a new start. If your new start includes moving forward with your divorce, it might be time to take a look at the level of conflict between you and your spouse. High conflict can make mediation less successful, but there are some ways to address this. If your conflict level is high, it might be worthwhile to consider what lies beneath that conflict. Is it based on rational disagreements? Or is it mainly fueled by anger and blame? Once you have answered these questions, you can consider whether or not there are steps you can take to reduce the conflict. Start by asking yourself where you fall on the following spectrum:

  • Low conflict
    • Neither of you blames the other for your marriage ending, and
    • You agree about all or most aspects of your divorce settlement.
  • Moderate conflict
    • One or both of you may blame the other for the divorce, but neither of you believes that this should impact your divorce settlement in any significant way, and/or
    • You have some disagreements about your marital settlement plan, but they are minor, and you believe that you can work them out.
  • High conflict
    • One or both of you blame the other for the divorce, and
    • You have marked disagreements about your post-divorce parenting arrangement, your property distribution plan, and/or the need for one of you to pay spousal support to the other.

How Conflict Affects Mediation

While it is true that high conflict can make mediation less successful, it is also true that the process itself tends to reduce conflict. Starting off with relatively high conflict, therefore, does not necessarily mean that you should give up on the idea. If you can succeed in lowering the temperature of your interactions, you are likely to benefit from the lower expenses, faster time frame, and vastly reduced stress that mediation can offer. How can you do this? The first step is to look more closely at what is going on. Notice that the categories above identify two distinct types of conflict. Differentiating between these is often the key to success.

The Cycle of Blame

The first kind of conflict is interpersonal and is based on blame and anger. Couples who have low or moderate conflict overall generally understand that blame in a divorce tends to be counterproductive. Even if one spouse did, in fact, do something egregious, the other does not want to focus on this and prefers to focus on the future instead. Couples in the high conflict category, on the other hand, tend to actively blame each other. Typically, one spouse believes that the other cheated on them, lied to them, or abandoned them in some way, and uses this to deny parenting time, demand more alimony, deny alimony, or complain about the division of property. The blamed spouse reacts defensively to these provocative moves and tries to turn the blame around onto the other spouse.

Sometimes both spouses blame each other from the outset. Regardless of how the cycle begins, however, it tends to escalate once a divorce is in progress. One spouse might file a fault-based complaint alleging that the marriage failed due to the other spouse’s misconduct. Proving this requires producing evidence of the misconduct. Even if the complaint does not specifically allege a fault ground for the divorce, there are likely to be affidavits full of aspersions against the other spouse. Once the mudslinging has begun—even if it was justified at the start—it becomes hard to stop. The cycle feeds on itself.

Resolving the Cycle

The point is not that blaming your spouse is “wrong.” In many cases, blame is justified. The point is that holding onto the blame is likely to be counterproductive for you. If all you want is for your spouse to acknowledge that they wronged you and apologize, then by all means, ask for that. If you speak authentically from your heart, you might even get it. Or you might not. Either way, the next step is to ask yourself what is best for you. If the answer is that letting go of your anger will benefit you, but you just can’t seem to do it on your own, then individual therapy can help.

If your spouse is the one caught up in blame, you have a harder task, but there are still things you can do on your own. Therapy might help you limit your reactivity and learn better responses to the escalation of conflict. It can be surprising how much a mutual cycle of reactivity can change for the better even if only one party decides to change.

Separating Rational Disagreements from Blame

The second kind of conflict is different. It is based on realistic disagreements with the other spouse. Couples experiencing this kind of conflict usually understand that the division of property should be fair, that support payments should be based on one’s party’s need and the other party’s ability to pay, and that parenting agreements must be based on the best interests of the children. They simply disagree on what is fair, on who needs what, or on what is actually best for those children. Simply having many disagreements about these types of issues does not make mediation a poor choice. In fact, the more complex your divorce is, the more you stand to gain by staying away from the high expenses of the courtroom.

The problem for many couples is that the two types of conflict tend to intersect. If you are focused on blaming your spouse, it can be difficult not to see everything the spouse proposes through a lens of feeling victimized or of wanting to punish the spouse. Couples who are not focused on blame find it much easier to commit to keepings things amicable and fair.

If you are having a lot of trouble coming to an agreement, it might be time to reassess the degree to which blame might be coloring things. You can then take steps to move forward.

Considering a Structured Process

If, in spite of all your efforts, you and your spouse seem hopelessly locked into anger and blame, you still might not have to give up on mediation entirely. You can look into trying a more structured mediation process.  Start by finding a mediator who has experience working with high conflict couples.   Look for someone who:

  • Offers or encourages pre-mediation coaching,
  • Promises to insist that participants stick to ground rules,
  • Will keep participants focused on making proposals and counter proposals that address well-defined issues,
  • Is willing to meet separately in caucus with each participant as often as necessary,
  • Understands how to help correct any pre-existing power imbalances, and
  • Is comfortable with higher attorney participation if that should prove necessary.

Pre-mediation coaching can improve your communication skills and ability to maintain composure under emotional stress, as well as to set and stick with firm personal boundaries. Ground rules and caucuses exist to help participants move forward without getting caught up and bogged down in emotional turmoil. Attorney participation can help everyone focus on the law and separate real issues from reactive responses.

Are you wondering whether or not divorce mediation is right for you? One of our caring and experienced mediators can help you decide. Contact us today for a free consultation.

 

Post-Divorce Modification in the Covid-19 Economy

In our last post, we talked about possible ways to achieve a modification of  a divorce settlement proposal if your financial situation has changed drastically due to the pandemic. If you have not yet signed a Marital Settlement Agreement (MSA), you have options in addressing property distribution issues such as marital home or business buyouts. If you have already signed your MSA, however, your options are more limited. Read more

Financial Impacts of COVID-19 in Divorce Mediation

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Way back in March of this year, which to many of us feels like eons ago, we talked about the importance of addressing the potential financial impacts of COVID-19 in divorce mediation. With the pandemic still raging, unemployment high, and the damage to many businesses ongoing, now is a good time to look a little more closely at what this might mean. Read more

The Mediation Process: How to Finalize Your Divorce

Finalizing your divorce

Finally, the day has come. You have hammered out all of your issues and your mediator has drafted a Memorandum of Understanding (MOU). Are you finally done with your divorce? What happens next? If you are both happy with the MOU, then you are almost at the finish line, but not quite. You still have a few loose ends to tie up before you can finalize your divorce. Read more

Reviewing the Mediation Process: Negotiation

In our last post, we reviewed the beginning of the mediation process, including ground rules and opening statements. In this post we will talk about the heart of the process: Negotiating. Read more

Reviewing the Mediation Process – Part I

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If you have decided to try divorce mediation, you may still have questions about how the mediation process works. Experienced divorce mediators generally stick to the same basic framework, but within that framework, there are individual differences. Read more

Getting Ready for Mediation

Consulting with a mediation attorney

In our last few posts, we reviewed some ways to assess the suitability of mediation for your own divorce. We also looked at how to gauge your readiness to begin the process. Last month we talked about choosing mediators and consulting attorneys. If you have gotten this far, and you now have a mediator and a consulting attorney you are happy with, you are probably thinking you are ready for  mediation. Before you schedule your first session though, there are still a few more things to take care of.

Read more