2. Generally, your client cannot write a new Will completely cutting out the soon to be ex out due to NJ's elective share statute.
2) The soon to be ex can be cut out if your client and the soon to be ex have ceased cohabitating as husband and wife.
2) Do not factor in estate taxes at this point.
3) Do add back gifts made by the decedent within two years of death.
4) Do add in retained interests held by decedent at the time of death.
5) See N.J.S.A. 3B:8-3 for a true definition.
b. You should have your client think for a few minutes about who should be trustee. Better the two parties agree than have to get the court involved to appoint one.
3. How important is it to guarantee that the ex put a provision in his/her Will stating that a certain percentage of his/her estate must go to their children? This can be contractually agreed to.
b. In the event the ex runs into financial trouble, your client can continue the payments;
c. It can save a huge amount in taxes;
2) If your client or an irrevocable life insurance trust (an "ILIT") owns the policy, then it will not be subject to estate taxes upon the ex's death (provided it was not transferred to your client or the ILIT within 3 years of the ex's death).
3) To give an example of real life savings, let's assume that ex is worth $2 million and is required to buy a $1 Million life insurance policy. That policy will cause ex's estate to be subject to approximately a $500,000 tax. This is particularly problematic if most of that is going to your client's children. By having your client or an ILIT own the policy, this estate would completely escape federal estate taxes and only be subject to minimal NJ estate taxes.
2. Moreover, many divorce attorneys forget to include the client's children in this part of the planning. It is imperative for attorneys with clients who's wealth is tied up in retirement accounts deal with where these retirement accounts go on the death of the ex.
3. A common example of the above may be illustrated as follows. H and W, who have 2children, get a divorce. H has a 401(k) worth $1,000,000. The two do a QDRO and split this evenly. H should insist of W, and W should insist of H, that their children be named as the beneficiaries of this 401(k) (AND any IRA that this gets rolled into). Otherwise, if W gets remarried, the new husband could legitimately be named as the new beneficiary of this retirement account. NOTE: They attorneys should leave this open for the clients to amend in an amicable way in the event one of the children should not be named as a beneficiary due to drugs, alcohol or any other legitimate reason.
2. Many times your client's parents will include the ex as a beneficiary of their estates. You should think about trying to get the soon to be ex to disclaim these interests as state law may not always treat the ex as dying on the date of the divorce.
2) Transfers to a trust for the benefit of the transferee former spouse of property on which liabilities exceed the transferor's basis for the property; and
3) Transfers to a trust for the benefit of the transferee former spouse of installment obligations.
c. If the transfer is deemed as a transfer incident to divorce, the transferee spouse takes the property with a basis in the property equal to the basis of the transferor spouse. This is known as a carryover basis.
d. Divorce attorneys should be careful in agreeing to take property that has high built in gains as result of this carryover basis.
e. Your client may be required by the settlement agreement to transfer an insurance policy on his or her life to the ex and continue paying the premiums on the policy. It is important to know that the transferor can only deduct those premium payments as alimony (taxable to the recipient) if the transferor makes the transferee both the owner and irrevocable beneficiary of the policy.