Separation and Your Estate Plan
“The difference between divorce and legal separation is that legal separation gives a husband time to hide his money.”
In Pennsylvania, there is no such thing as legal separation for spouses. People are either married or single. Rights created by marriage can only be changed by divorce. This is not to say, of course, that spouses do not live separately. In fact, sometimes spouses live separately for many years. There can be religious or financial reasons for not dissolving the marriage even though the spouses live apart.
Separation simply means that two spouses no longer live together. Separation may occur by mutual consent or by one spouse leaving or being forced to leave the home. Under some circumstances, spouses may be considered separated even though they are still living together in the same residence. There is no legal requirement that a husband and wife be separated for a period of time in order to file for a divorce, and there is no legal requirement that a divorce be filed upon separation. In Pennsylvania, once parties have lived separate and apart for a period of two years, one party may seek a divorce without having to obtain the consent of the other party.
Living separately has no effect on the validity of your will, power of attorney or medical directive. After divorce, provisions in a will for a spouse are void. Also, upon filing for divorce, any power of attorney naming the spouse is revoked. Neither of these provisions applies to separation.
Some spouses change their wills when they separate and eliminate provisions in the will for the spouse. If you disinherit your spouse, the spouse has a right to elect against the will to claim a one-third (1/3) share. The surviving spouse is entitled to a one-third (1/3) share even if divorce proceedings are pending.
There are two exceptions to this right of election. A spouse who for one year or more before the death of the deceased spouse has “willfully neglected or refused to perform the duty to support the other spouse,” or who for one year or more has “willfully and maliciously deserted the other spouse” shall have no right of election, or even of receiving an intestate share. Another exception has been in the law since January of 2005: the right of election does not apply if the death of the spouse occurs during the divorce proceedings, a final decree of divorce has not been entered and grounds have been established. Grounds can be established, depending on the type of divorce action that is proceeding (1) if the court adopts a report of a master or makes its own findings that grounds for divorce exist, (2) if both parties have filed affidavits of consent, or (3) if an affidavit has been filed and no counter-affidavit has been filed or, if a counter-affidavit has been filed denying the affidavit’s averments, the court determines that the marriage is irretrievably broken and the parties have lived separate and apart for at least two years at the time of the filing of the affidavit.
Sometimes when a husband and wife separate, they sign a Separation Agreement which is a legally binding contract. Typically, these agreements cover division of property, child support payments and spousal support payments during the period of separation. Custody arrangements can also be made in such an agreement.
Although spouses are separated, they still both remain fully liable on joint debts. Both may be responsible for 100% of the debt, not just one-half. A separated spouse may also be responsible for the necessities provided to the other spouse. For example, a husband or wife may be responsible for medical expenses for the other spouse even though they have lived apart for years.
If you file a joint return with your separated spouse, be aware that you are jointly liable for the tax. If your separated spouse doesn’t pay or under reports income and gets interest and penalties, you are liable. Unless you are very sure your separated spouse is filing a correct joint return with you, refuse and file separately. You cannot be required to file a joint return. If you file a joint return there is no such thing as “my” refund. The refund is joint, just like the return.
Often as part of estate planning, spouses will execute general powers of attorney naming each other as agent. Usually, these powers of attorney grant the other spouse complete control over the assets of the individual granting the power. If a wife gives a husband a general power of attorney, the husband can use this power to close or make withdrawals from the wife’s individual bank accounts, brokerage accounts, and other assets. Obviously, this can be ruinous. The only way to revoke a power of attorney is to locate all of the originals and destroy them and/or notify the agent that the power is revoked. Notifying the spouse that his power of attorney is revoked will do little good it the spouse is bent on taking your assets. Your only recourse is to give written notice to all the institutions which hold your assets to inform them that the power of attorney has been revoked. No doubt the wrong-doing of a spouse improperly using a power of attorney will be exposed during the divorce. The Court will try to remedy the situation and even impose sanctions. But if the money is gone, it’s gone.
Property held jointly is not affected by separation – it automatically passes to the surviving joint owner. Separation has no effect on beneficiary designations on life insurance, annuities retirement plans or IRA’s. Review the beneficiary designations that you have made. If you are not happy with the designations, make new ones. Remember that as long as you are married, your spouse is entitled to be the beneficiary of qualified retirement plans like 401 (k)’s and other ERISA plans unless he or she consents to be removed. The spouse does not have a right to be named as the beneficiary of an IRA.