Estate planning for divorced cases and appointment of a Guardian

Estate planning for divorced cases and appointment of a Guardian

When married couples decide to write their Wills, the possibility that their marriage will end in divorce is often not in their thought process. There are exceptions of course, but these are likely to occur at the higher end of the income spectrum.

The reality is that there is always a chance that a marriage can sour, for a myriad of reasons that are married couple-specific. If marital problems cannot be resolved, the marriage could end in divorce. According to the latest available data on marriages and divorces in Singapore compiled by the Department of Statistics, there were 7,614 successful marital dissolutions in 2016. This was a 1.2% increase from 2015, which saw 7,522 divorces. In 2017, the reported figure was 7,578 divorces. Common reasons for divorce include adultery, domestic violence and financial issues.

Do a new Will immediately

Typically, married couples will name each other as executor of their Wills, and will leave the bulk of their assets to each other and their children. In the worst-case scenario that a marriage is headed for divorce, it is advisable for the spouses to write new Wills immediately to reflect the new circumstances. Upon writing new Wills, the divorcing spouses will likely have to look elsewhere for executors of their Wills.

Any delay in writing a new Will can create serious problems. For example, if either spouse dies suddenly before the divorce is rubber-stamped in the courts, the asset distribution guidance in the original Wills remains valid. This is the case even when a divorce is in the midst of being processed in the courts. This means the asset distribution won’t reflect any changes that the deceased person intended as a result of the deterioration of the marriage and divorce.

Meanwhile, a finalised divorce also won’t affect assets that have beneficiary designations, such as life insurance policies or CPF nominees in Singapore, or bank and brokerage accounts that a person has opened with his or her spouse. Thus, a careful review of all of a person’s assets is essential when a married couple is divorcing to ensure that the relevant assets belong to each spouse going forward.

Guidance on guardianship needed

Now, if the divorcing couple has minor children, there are additional factors to consider. The divorce proceedings will take into consideration which spouse has custody or if joint custody is the best option. In such cases, the courts will always act in the best interests of the children. Any new Will should set out the new terms for the distribution of assets to the children when, for example, they reach 18 years of age.

For minor children, guardianship is a key component to ensure that they are well taken care of.  A person may choose to name his or her ex-spouse as the guardian in the Will. Even if that is not written in the Will, the ex-spouse will most likely serve as guardian of minor children in the event of death unless the spouse is deemed unfit to have custody of the children by the courts. In the case of a bad divorce, or if one of the spouses is incapable of raising the children, the spouse might want to name someone other than the ex-spouse as the guardian in the Will.

Setting up a revocable living trust for minors

It is also common to set up a revocable living trust that will spell out instructions and requirements for paying alimony and child support. If there is no Trust and the ex-spouse is the guardian of the minor children, he or she will have control over the children’s finances until they turn 18. In divorces, most people may not want their ex-spouses controlling the money that has been earmarked for the children. So, the choice of a trustee for the revocable living trust is also an important consideration.

Finally, it should be noted that remarriage automatically revokes an existing Will. If a person remarries after the divorce is official and still doesn’t have a Will, then the new spouse will be entitled to 50 per cent of the person’s estate and their children will be entitled to the other half. If a person has been married more than once and has children from past marriages and the current marriage, it is imperative that a new Will is written that reflects all the children, in order to avoid any hassles in the future for loved ones.

In the next blog post, we will discuss at why doing a Lasting Power of Attorney (LPA) matters and the purpose of LPA Form 2

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