Divorce can be traumatic for the whole family. Even if the process is amicable, it involves many tough decisions, legal hassles, and painful emotions that can drag out over several months, or even years.
That said, while you probably don’t want to add any more items to your to-do list during this trying time, it’s absolutely critical that you review and update your estate plan—not only after the divorce is final, but as soon as possible once you know the split is inevitable.
Even after you file for divorce, your marriage is legally in full effect until your divorce is finalized. That means if you die while the divorce is still ongoing and you haven’t updated your estate plan, your soon-to-be-ex spouse could end up inheriting everything. Maybe even worse, in the event you’re incapacitated before the divorce is final, your ex would be in complete control of your legal, financial, and healthcare decisions.
While some state laws limit your ability to completely change your estate plan once your divorce has been filed, the following are a few of the most important updates you should consider making as soon as possible when divorce is on the horizon.
1. Update your power of attorney documents for healthcare, financial, and legal decisions
If you are incapacitated by illness or injury during the divorce, who would you want making life-and-death healthcare decisions on your behalf? Similarly, who would you want managing your finances and making legal decisions for you? In light of the impending split, you’ll most likely want to select another individual. Again, you have to take action if you do not want your spouse making these decisions for you.
2. Update your beneficiary designations
Failing to update beneficiary designations for assets that do not pass through a will or trust such as life insurance policies and retirement accounts, is one of the most frequent planning mistakes made by those who get divorced. If you get remarried following your divorce, for example, but haven’t changed your IRA beneficiary designation to name your new spouse, the ex you divorced 10 years ago could end up with your retirement savings upon your death.
That said, in most states, once either spouse files divorce papers with the court, neither party can legally amend their beneficiaries without the other’s permission until the divorce is final. Given this, if you’re anticipating a divorce, you may want to consider changing your beneficiaries prior to filing divorce papers. If your divorce is already filed, you should consult with us to see if changing beneficiaries is legal in your state—and in your best interest.
3. Create a new will
You should create a new will as soon as you decide to get divorced, because once you file, you may not be able to change your 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 his or her family. And unless it’s your wish, you’ll probably no longer want your ex—or any of his or her family—listed as your will’s executor or administrator, either.
If you die before the divorce is final, you probably won’t be able to entirely disinherit your surviving spouse through the new will. However, it’s almost certain you wouldn’t want him or her to get everything. Given this, you should update your will as soon as possible once 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.
And should you choose not to create a new will during the divorce process, don’t assume that your old will is automatically revoked once the divorce is final. State laws vary widely in regards to how divorce affects a will. I can help you understand the law and how to best navigate it when creating your new will—whether you do so before or after your divorce is over.
4. Amend your existing trust or create a new one
If you have a revocable trust set up, you’ll want to review and update it, too. Like wills, the laws governing if, when, and how you can alter a trust during a divorce can vary, so you should do it as soon as legally possible. In addition to reconsidering what assets your ex spouse should receive through the trust, you’ll probably want to replace him or her as a successor trustee if they are so designated.
5. Revisit your plan once your divorce is final
During the divorce process, your main planning concern is limiting your soon-to-be ex’s control over your life and assets should you die or become incapacitated before divorce is final. Given this, the individuals to whom you grant power of attorney, name as trustee, designate to receive your 401k, 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, and/or when close family members pass away.
Don’t wait; act now! Contact me today to get the process underway.