When most couples are in the midst of handling their estate plans, divorce is not only a subject that is not top of mind, it may also be taboo. However, attorneys that recommend trusts and other estate planning tools should be conscious of the possibility that this very happy couple may not remain so forever. As a result, practitioners should include provisions in their agreements that either address what should happen in the event of a divorce or implement plans that would not be impacted by divorce.
Two of the most common planning tools — Qualified Personal Residence Trusts (“QPRTs”) and Irrevocable Life Insurance Trusts (“ILITs”) — can create unique problems during divorce if the proper planning was not done at the outset. Client confusion over the nature of these estate-planning vehicles often results in disappointment and surprise when they realize that the home they think of as theirs isn’t, or the insurance policy they think they own, they don’t.
Irrevocable Life Insurance Trusts
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