Updating Your Estate Plan For Divorce: 5 Changes To Make
Divorce is a highly stressful event, even when it is amicable, because your life is turning itself upside down. That’s why it is easy for estate planning to slip your mind until it is too late. Neglecting to update your estate plan for divorce can have potentially tragic consequences. Furthermore, you shouldn’t wait until the divorce is final to rework your plan—you should update it as soon as you realize the split is inevitable.
Here’s why: Your marriage is legally still in full effect until your divorce is final, so if you die or become incapacitated while your divorce is ongoing and haven’t changed your estate plan, your soon-to-be ex-spouse could wind up with complete control over your life and assets. Unless you want your ex to have that kind of power, you need to act as soon as possible.
Keep in mind that some states have laws that limit your ability to change your estate plan once your divorce is filed, so you may want to consider making some or all of the following changes to your estate plan as soon as divorce is on the horizon and before you’ve filed.
1: Change Your Power Of Attorney Documents
A durable financial power of attorney allows you to grant an individual of your choice the legal authority to make financial and legal decisions on your behalf should you become unable to make such decisions yourself. Similarly, a medical power of attorney grants someone the legal authority to make your healthcare decisions in the event of your incapacity. All adults over age 18 should have both a durable financial power of attorney and a medical power of attorney in place.
Without these documents in place, your spouse has priority to make financial and legal decisions for you, and since most people typically name their spouse as their decision maker in these documents, you need to act even before you begin the divorce process and grant this authority to someone else, especially if things are anything less than amicable between the two of you.
Unless your attorney is an expert in estate planning, we recommend you don’t rely on your divorce lawyer to update these documents for you. There are just far too many important details in these documents that can be overlooked by a lawyer using a standard form, rather than the custom documents we, as your Personal Family Lawyer®, will prepare for you.
2: Change Your Beneficiary Designations
Updating the beneficiary designations for assets that do not pass through a will or trust, such as life insurance policies and retirement plans, is your next step. Failing to update your beneficiaries can lead to serious trouble down the road and unfortunately, we see this happen all the time. If you get remarried following your divorce, for example, but you haven’t changed the beneficiary of your 401(k) to name your new spouse, the ex you divorced 10 years ago could end up with your retirement account upon your death.
Since there are often restrictions on changing beneficiary designations once a divorce is filed, the timing of your beneficiary change is particularly critical. In most states, once spouse files divorce papers with the court, neither party can legally change their beneficiaries without the other’s permission until the divorce is final. That’s why you should consider changing your beneficiaries prior to filing divorce papers and then post-divorce you can always change them again to reflect whatever is determined in the divorce settlement.
3: Create a New Will
You should create a new will as soon as you decide to get divorced since once divorce papers are filed, you may not be able to change your will. Because most married couples name each other as their executor and the primary beneficiary of their estate, it’s important to name a new person to fill these roles as well.
When creating a new will, rethink how you want your assets divided upon your death. This most likely means naming new beneficiaries for any assets that you’d previously left to your future ex and their family. Keep in mind, some states have community-property laws that entitle your surviving spouse to a certain percentage of the marital estate upon your death, regardless of what your will says. So, if you die before the divorce is final, you probably won’t be able to entirely disinherit your surviving spouse through the new will. Still, it’s almost certain you wouldn’t want them to get everything. Considering this, you should create your new will as soon as you realize divorce is inevitable to ensure the proper individuals inherit the remaining percentage of your estate should you pass away while your divorce is still ongoing.
It is important to note that should you choose not to create a new will during the divorce process, you should not assume that your old will is automatically revoked once the divorce is final. State laws vary widely regarding how divorce affects a will. In some states, your will is revoked by default upon divorce. In others, unless it’s officially revoked, your entire will remains valid even after the divorce is final.
4: Amend Your Existing Trust or Create A New One
If you have a revocable living trust, you’ll want to update it too. Like wills, the laws governing if, when, and how you can change a trust during a divorce can vary, so you should consult us as soon as possible if you are considering divorce. In addition to reconsidering what assets your soon-to-be-ex spouse should receive through the trust, you’ll probably want to replace him or her as successor trustee, if they are so designated.
If you don’t have a trust in place, you should seriously consider creating one, especially if you have minor children. Trusts provide an array of benefits that are unavailable with a will and they’re particularly well-suited for blended families. Given the likelihood that both you and your spouse will eventually get remarried and perhaps have more children, trusts are an invaluable way to protect and manage the assets you want your children to inherit.
By using a trust, for example, should you die or become incapacitated while your kids are minors, you can name someone of your choosing to serve as successor trustee to manage their money until they reach adulthood, making it impossible for your ex to meddle with their inheritance. Given the enhanced protection and control that a trust can provide compared with a will, you should at least discuss creating a trust with us before ruling out the option entirely.
5: Revisit Your Estate Plan Once Your Divorce is Final
During the divorce process, your primary objective is limiting your soon-to-be ex’s control over your life and assets should you die or become incapacitated before divorce is final. For this reason, the individuals to whom you grant power of attorney, name as trustee, designate to receive your 401(k), or add to your estate plan in any other way while the divorce is ongoing are often just temporary.
Once the divorce is final and your marital property has been divided up, you should revisit all of your estate planning documents and update them accordingly based on your new asset profile and living situation. From there, your plan should continuously evolve along with your life circumstances, particularly following major life events, such as getting remarried, having additional children, or when family members pass away.
Get Started Right Away
Although it may be tempting to put off changing your estate plan when you are going through a divorce, especially if the process has been contentious, you can’t afford to wait. Meet with us to review your estate plan immediately upon realizing that divorce is unavoidable and then schedule a follow-up visit once your divorce is final. If you delay updating your estate plan, even just for a few days during your divorce, it can make it legally impossible to change certain parts of your plan, so act now. Contact us today to learn more.
This article is a service of Levi Alexander, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.
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