1. How will the divorce effect my will and the estate planning I have done?
If you have a will or other estate planning instruments in effect, you may need to amend these documents to properly provide for the beneficiaries you desire. Under Alabama law, if you were to die after your divorce but before executing a new will, your spouse will not inherit under any existing will. The Court will treat your spouse as if he or she died before you. However, other items such as trusts, insurance plans, retirement plans, living wills and the like may not receive the same treatment. It is strongly recommend that you review your estate planning needs with your lawyer in conjunction with your divorce, and that the necessary steps be taken to protect both your interests as well as that of your loved ones.
2. What are the legal requirements to make a will?
In Alabama, you must be at least 18 years old and able to understand that you are making a will and directing the disposition of your property. It is best to consult with a lawyer regarding the drafting of your will, as there are certain requirements for the form of the will, the necessary number of witnesses and the proper execution of the will.
3. What happens if you do not have a will?
If you do not have a will, your assets will be distributed by the State under the terms of the Alabama Probate Code.
4. How will the State distribute my assets?
If you have children and you do not have a will, your property will be distributed as follows: If you are survived by a current spouse, his or her share is determined first. If all of your children were also born to your surviving spouse, your surviving spouse will be entitled to the first $50,000 of your estate, plus one-half the balance. If you have children who were born to someone other than your surviving spouse (for example: from a prior marriage), your surviving spouse will be entitled to one-half of your estate. The remainder of your estate not passing to your surviving spouse will pass to your children in equal shares. If you are a single parent, your entire estate will pass to your children in equal shares.
5. How can I prevent these allocations?
The above allocations may be changed by your will. Generally, you may leave your property to anyone you wish and in the proportions you wish. However, if you are married, there are laws, which may prevent the disinheritance of your surviving spouse.
6. How will my children receive their inheritance?
According to Alabama Probate Law, any child under the age of nineteen is considered a minor. The probate court will not allow the outright distribution of your estate to a minor; therefore, a conservator will have to be appointed by the court to receive the distribution on behalf of your child. The conservator will be required to post a bond based upon the value of the property passing to the child, and will be renewable each year while the child is a minor. Throughout the term of the conservatorship, which will last until the child reaches the age of nineteen, the conservator will be subject to the control of the Probate Court.
Additionally, there are laws that restrict how the assets of the conservatorship are held and invested; thus, the conservator will not have complete discretion in making investments with the child's money. Finally, the conservator is restricted as to how the assets are used for the child. Only distributions deemed necessary for the child's health, education and support would be allowed. Thus, in some cases, the purchase of a computer or a set of encyclopedias may be held inappropriate by the court.
Every three years, the conservator will be required to file a complete accounting with the court and present receipts for all disbursements. Once the child reaches the age of nineteen, the assets will be distributed outright to the child.
7. What can I do to avoid having a conservator appointed for my children?
Even if you have a will that leaves property to your minor children, the court will not allow an outright distribution to a minor. However, you may create a trust for minor children in your will that will address all of the issues discussed above regarding conservatorships.
8. How do I create a trust?
First, you may name an individual, bank or trust company to serve as trustee of the trust. The trustee, like the conservator as discussed above, will receive all distributions from your estate on behalf of your minor child. However, your will may provide that your trustee is not required to post a bond for serving as such. This could save hundreds, and perhaps thousands, of dollars in large estates. Additionally, the trustee will be controlled by the terms of your will as opposed to being controlled by the Probate Court. Therefore, your will may provide that the trustee has complete discretion in making investments and using the assets for the benefit of your child. Finally, you can decide at what age your property will ultimately be distributed to your child. In large estates, you may want to stagger the distributions over two or more ages, i.e. one-half at age twenty-one and the remainder at age twenty-five.
9. What other benefits are there to having a will?
In addition to insuring that your property will pass in the manner you desire, a will can be a valuable tool in estate tax planning.
10. What is estate tax planning and why do I need it?
Since estate tax rates start at 37% and rise to 55%, planning to make the most of your estate tax exemption is important. Currently, every individual is entitled to a credit against estate tax of $202,050; this is the equivalent of a $625,000 exemption. Everything you own is counted to determine the value of your estate, including the face value of life insurance, the value of your retirement accounts and the fair market value of all other assets. Estate tax planning means you may be able to protect more property that can pass to your children or other beneficiaries.
