AZ asks: What Legal issues do you need to consider in a divorce?

divorce legal issuesTheodora Vaporis has been an attorney for twenty years. For the past eight years she has practiced with the Greensboro firm of Forman Rossabi Black, P.A., a multi-specialty law firm where she specializes in Estate Planning, Estate Administration, Estate Litigation and Guardianship Law.Theodora is licensed to practice in North Carolina, California, Washington, D.C. and Pennsylvania.

She is a member of the Greensboro Bar Association, North Carolina Bar Association, Greensboro Estate Planning Council and the North Carolina Women’s Bar Association. She is also a member of the North Carolina Legislative Committee on Estate and Fiduciary Law which drafts legislation pertinent to her field of practice. Theodora is very active in the Greek Community and sits on the Diversity Committee at Greensboro Day School. Theodora can be reached directly at tvaporis@frb-law.com.

AZ asks:  What do you need to consider changing immediately if you are in the middle of a divorce?

There are several things.  It is imperative that you make sure you change any contract policy beneficiaries immediately. These would be your life insurance, IRA and any other policies that pass by contract to beneficiaries. If you die and you have not changed these contract policies, your ex-spouse remains the beneficiary. There is nothing in the law that provides that if you are divorced from a person they no longer are your beneficiary. This is because these policies are dictated by what is called contract law rather than the law of descent in North Carolina.

In addition, you should change your Will as soon as you begin divorce proceedings. In the Will, it can be spelled out that you are in the process of a divorce. Generally, unless you are divorced or you have a written Separation Agreement in which your spouse has given up rights to inherit, your spouse maintains rights in your estate until the divorce is final. However, there are some exceptions to this rule in North Carolina. An example of this would be if your spouse has abandoned you or not supported you. For this reason, it is important to speak to an attorney to make sure you address this issue directly and make it clear why you feel you can disinherit someone you are not yet divorced from. If you do not fall under any of these exceptions, at least your new Last Will and Testament will be signed and the provisions disinheriting your spouse effective the minute you are divorced or enter a written Separation Agreement with no gap time. As an attorney, I have had two cases in the last year alone where the soon-to-be-ex dies within a week of the divorce becoming final.

AZ asks:  What can’t be changed while in the middle of a divorce?

What you can’t change is the beneficiary on a 401-K or other Employee Retirement Income Security Act plan policies (ERISA) unless you are divorced, have a written separation agreement that allows the change or your soon-to- be- ex-spouse has consented.

AZ asks: How should you handle your Will while you are going through a divorce?

A Last Will and Testament is the document in which you provide for a back-up plan if you die and your children are still minors. If you leave minor children and the child’s other parent still has legal parental rights, there is little that you can do to prevent the other parent from taking physical and legal custody. It is still a good idea to have an alternative plan if your ex has predeceased you or your ex dies after you and has not provided a recommended guardian in his or her Will. You do this by adding a guardianship provision to your Last Will and Testament. The Court gives great weight to the recommendation of the parents in their Will in confirming who will be appointed as guardian upon the death of the second parent. Although the person you appoint is given tremendous consideration, the Court has the final say in all cases and this is to protect your child. If there is a conflict between your recommended guardian and your spouse’s recommended guardian, the Court will always determine the “best interest of the child.” If you die and your ex-spouse then has custody, there is little that your parents can do to access the children without the consent of your ex. Absent an ongoing custody dispute or lack of an “intact family,” grandparents have few rights in North Carolina. Of course, it is always a good idea to consult with an attorney to see if there are any exceptions in your particular situation.

AZ asks: What is the difference between a Financial Power of Attorney and a Durable Power of Attorney?

AFinancial Power of Attorney can be a wonderful tool however it is important when discussing this document to also make sure clients are aware of the disadvantages as well. This is because a Durable Power of Attorney is a powerful tool. A Durable Power of Attorney is a document in which the Principal (person giving the power) gives their Attorney-in-Fact (AIF) the power to stand in their shoes and make all financial decisions that they could make. The documents can also limit powers but usually they are drafted to be very open ended. Please beware of Internet forms where you have not been properly counseled. The power given in this document can be immediate so that the AIF has power and can act for you right away whether or not you are incapacitated, or it can be “springing” which means it only goes into effect if you are incapacitated. This document can be very helpful in assisting a person who has become incapacitated because of an accident, dementia or old age. It is important when choosing someone to act for you that you do not choose someone who has financial problems, a spouse with financial problems, a problem marriage, substance abuse issues or a gambling problem. If people are not good at managing their own money, they will not do a good job managing yours. Discuss with your attorney any concerns you may have and additional safeguards can be put in the Power of Attorney. Annual accountings are often times waived in these documents but at times they should be encouraged, either with approval needed from the Court or just from other interested parties.

AZ asks: What if you don’t have anyone that you trust to handle the finances?

At times, a client will tell me that they do not have anyone that they absolutely trust to handle their finances. In that case there is an alternative, albeit it can be a more expensive alternative. The law provides for a legalGuardianship. In this case the Court appoints someone to act for you when you are incapacitated. With a legal Guardianship, the Court requires that this person (the Guardian) submit yearly accountings to the Court for approval of all expenditures made on your behalf. Some decisions, such as the sale of real estate, also require pre-approval from the Court.

AZ asks: Do I need a Health Care Power of Attorney if I already have a Financial Power of Attorney?

AHealth Care Power of Attorney is as important as a financial one, and arguably even more important. In this document you name a person (and a back-up) to make all health care decisions for you if you are unable to do so.  If you have a Living Will, this would not include end of life decisions but it can also provide for this if you choose. Your health care agent can hire and fire your doctors, make medical decisions, authorize surgery, access your health records and choose your nursing home. They can also prevent people from having access to you. You should not sign a “one size fits all” Health Care Power of Attorney. In this document you can and should outline your feelings about everything from organ donation, body donation, autopsy, nursing homes, use of experimental drugs and mental health treatment. The limitations and exceptions you put in this document will be binding on your health care agent and will also give them guidance in making decisions for you.

AK asks: Who should you choose to be your executor of an estate?

When choosing an executor of an estate, you can choose a relative, a friend, a professional such as a lawyer or CPA, a bank or a professional fiduciary. Usually financial advisors are precluded from serving in this capacity because of their own regulations, but clients often recommend in their Last Will and Testament that their executor seek the guidance of their financial planner. Although family members appear to be an obvious choice for many, choosing one child to serve as executor can often create animosity between siblings so you should be sure that your family can withstand one child “being in charge.”

It is important to examine with your attorney your individual family dynamics. Choosing a child is not always the less expensive alternative since they have the right to ask the Court for up to five percent (5%) of all of the assets of the estate plus Five Percent (5%) of any checks they write on behalf of the estate. Of course, if you have an intact family where all the family members get along well and respect each other, this can certainly work and can be a good option in that case. Also, you can name two executors who work together as co-executors which provides for checks and balances.  If you are choosing an attorney to name as executor, ask the attorney if they charge both as executor and as attorney for the estate. It is considered ethical under North Carolina to “double dip” in this way but many attorneys make it their policy to waive executor commissions and only charge the same fee they would charge as attorney if the executor brought the estate to them to administer. Naming a bank can have the same advantage and disadvantage. A bank takes everything personal out of the administration, but at times when a personal touch is needed in making a discretionary decision, this can be a disadvantage. Banks also charge higher fees and often will not accept administering estates below certain values.

Theodora Vaporis is not affiliated with nor endosed by LPL Financial.

About Ann Zuraw

Ann Zuraw, the voice behind "Chicks, Chat and Change", is a Certified Financial Planner (CFP®), Chartered Financial Analyst (CFA®), and Certified Divorce Financial Analyst (CDFA™).If you have comments on this post contact Ann Zuraw

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