Why a Schwarzenegger Divorce Will Mean a Trip to Their Estate Planning Attorney, Too
Governor Arnold Schwarzenegger and Maria Shriver’s announced separation in May, 2011 is a personal tragedy for the couple. Their statement created a feeding frenzy for the media, and like many of life’s dramatic milestones, a teachable moment for estate planning attorneys.
The Schwarzeneggers’ separation will trigger many legal issues if the estrangement lasts and leads to a divorce. Their situation illustrates how wills and trusts need to be re-examined at key points in our lives.
When couples divorce, they are often full of emotion. One or both parties often just want the experience to be over, and they don’t want to drag themselves though any more emotional details.
Unfortunately, divorce, like marriage, birth of children, and other rites of passage, upsets existing estate plans. If you divorce, you absolutely must examine your trusts, will, and other estate documents.
In California, a divorce will invalidate any gift to the spouse in a will created during the marriage, unless you have specifically stated that your gift will be valid after a divorce.
This law can wreak havoc with your intentions.
In a typical, simple will in which the wife leaves the husband all of her assets, after a divorce the inheritance laws of the State of California will divvy up her assets as if she never ever had a will. Estranged siblings, remote relatives, and even the State itself may wind up receiving her assets.
Or, maybe your will leaves your wife a gift of a specific dollar amount, smaller dollar gifts to your children, and the modest “remainder” to be divided up among your favorite charities. If you divorce and die without updating your will, then everything that would have gone to your now ex-wife will go to the charities. Instead of a modest amount, the charities could receive more than your children. Your ex-wife, who you still may care for and wanted to remember in your estate, will receive nothing!
If the Schwarzenegger’s divorce, it’s likely that they will be gently guided by their attorneys into updating their trusts and wills. You, too, need to talk to an estate planning attorney if you get divorced.
Of course, you need to look at your will and trusts when events other than divorce occur.
When Should You Re-Examine Your Estate Planning Documents?
Happy milestones, like the maturing of a child, the birth of grandchildren, an increase in wealth are also good reasons to pull out your trusts and will to make sure that they still reflect your situation and wishes.
You need to update your documents to replace property you’ve sold and to add new assets you’ve acquired.
You need to look at your gifts to make sure that they are still reasonable. When your estate was only $150,000, leaving 10% to a friend as token made sense. Now that your estate is worth $3 million and your friend is a multi-millionaire in her own right, that 10% is simply wrong!
A significant decrease in your net worth also requires that you look at your trust and will. When you were flush, you might have specified a gift of $50,000 to your alma mater. That $50k was only 1% of your $5 million estate. But, if your assets are now only $250,000, you may not want to leave 25% of your estate to your college when your wife will need that money after you’re gone.
Sometimes, as attorney Julia Wald notes in the video above, there is no legal or financial requirement for you to update your documents, but there are emotional reasons. Suppose your will says that your grandchildren will receive equal shares of a part of your estate. When you wrote your will you only had two grandchildren, Ethan and Emma, and you mentioned them by name. Now you have 5 grandchildren. If you die without updating your will, or at least writing a note that acknowledges by name the new additions to your family, you might hurt the feelings of William, Noah, and Mia.
Don’t wait for the next celebrity couple’s marriage to hit the rocks before you're motivated to check your estate documents. Pull out your trusts and will, and make sure that what’s written still makes sense.
Please phone contact us at 415.482.7555 when we can help you update your estate plan.