Going through divorce can be an overwhelming experience that impacts nearly every facet of your life, including estate planning. Yet, with so much to deal with during the divorce process, many people forget to update their plan or put it off until it’s too late.
Failing to update your plan for divorce can have a number of potentially tragic consequences, some of which you’ve likely not considered—and in most cases, you can’t rely on your divorce lawyer to bring them up. If you are in the midst of a divorce, and your divorce lawyer has not brought up estate planning, there are several things you need to know.
First off, you need to update your estate plan, not only after your divorce is final, but as soon as you know a split is inevitable.
Here’s why: until your divorce is final, your marriage is legally in full effect. This means if you die or become incapacitated while your divorce is ongoing and haven’t updated your estate plan, your soon-to-be ex-spouse could end up with complete control over your life and assets. And that’s generally not a good idea, nor what you would want.
Given that you’re ending the relationship, you probably wouldn’t want him or her having that much power, and if that’s the case, you must take action. While state laws can limit your ability to make certain changes to your estate plan once your divorce has been filed, here are a few of the most important updates you should consider making as soon as divorce is on the horizon.
1. Update Your Power of Attorney Documents
If you were to become incapacitated by illness or injury during your divorce, the very person you are paying big money to legally remove from your life would be granted complete authority over all of your legal, financial, and medical decisions. Given this, it’s vital that you update your power of attorney documents as soon as you know divorce is coming.
Your estate plan should include both a durable financial power of attorney and a medical power of attorney. 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 for yourself. Similarly, a medical power of attorney grants someone the legal authority to make your healthcare decisions in the event of your incapacity.
Without such planning 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, it’s critical to take action—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.
Once divorce is a sure thing, don’t wait—immediately contact an estate planning law firm to support you in getting these documents updated. We recommend you don’t rely on your divorce lawyer to update these documents for you, unless he or she is an expert in estate planning, as there can be many details in these documents that can be overlooked by a lawyer using a standard form, rather than the documents we will prepare for you.
2. Update Your Beneficiary Designations
As soon as you know you are getting divorced, update beneficiary designations for assets that do not pass through a will or trust, such as bank accounts, life insurance policies, and retirement plans. Failing to change your beneficiaries can cause serious trouble down the road.
For example, if you get remarried following your divorce, but haven’t changed the beneficiary of your 401(k) plan to name your new spouse, the ex you divorced 15 years ago could end up with your retirement account upon your death. And due to restrictions on changing beneficiary designations after a divorce is filed, the timing of your beneficiary change is particularly critical.
In most states, once either spouse files divorce papers with the court, neither party can legally change their beneficiaries without the other’s permission until the divorce is final. With this in mind, if you’re anticipating a divorce, you may want to consider changing your beneficiaries prior to filing divorce papers, and then post-divorce you can always change them again to match whatever is determined in the divorce settlement.
If your divorce is already filed, consult with us and your divorce lawyer to see if changing beneficiaries is legal in your state—and also whether it’s in your best interest. Finally, if naming new beneficiaries is not an option for you now, once the divorce is finalized it should be your number-one priority. In fact, put it on your to-do list right now!
3. Create a New Will
Creating a new will is not something that can wait until after your divorce. In fact, 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. And because most married couples name each other as their executor and the 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 his or her family. Keep in mind that some states have community-property laws that entitle your surviving spouse to a certain percentage of the marital estate upon your death, no matter what your will dictates. 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.
Yet, it’s almost certain you wouldn’t want him or her to get everything. With this in mind, you should create your new 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.
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. In some states, your will is revoked by default upon divorce. In others, unless it’s officially revoked, your entire will —including all provisions benefiting your ex— remains valid even after the divorce is final.
With such diverse laws, it’s vital to consult with us as soon as you know divorce is coming. We can help you understand our state’s laws and how to best navigate them when creating your new will—whether you do so before or after your divorce is complete.
4. Amend Your Existing Trust Or Create a New One
If you have a revocable living 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 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.
And if you don’t have a trust in place, you should seriously consider creating one, especially if you have minor children. Trusts provide a wide range of powers and benefits unavailable through 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.
Beyond this key benefit, trusts afford you several other levels of enhanced protection and control not possible with a will. For this reason, you should at least discuss creating a trust with an experienced lawyer like us before ruling out the option entirely.
During the divorce process, your primary planning goal is limiting your soon-to-be ex’s control over your life and assets should you die or become incapacitated before divorce is final. In light of this, the individuals to whom you grant power of attorney, name as trustee, designate to receive your 401k, or add to your plan in any other way while the divorce is ongoing are often just temporary.
Once your divorce is final and your marital property has been divided up, you should revisit all of your planning documents and update them based on your new asset profile and living situation. From there, your plan should continuously evolve as your life changes, especially following major life events, such as getting remarried, having additional children, and when close family members pass away.
Get started now
Going through a divorce is never easy, but it’s vital that you make the time to update your estate plan during this trying time. Meet with us at the Elliott Feldman Law Group to review your plan immediately upon realizing that divorce is unavoidable, and then schedule a follow-up visit once your divorce is finalized.
Putting off updating your plan, even for a few days, as you are in the process of a divorce can make it legally impossible to change certain parts of your plan, so act now. And if you’ve yet to create any estate plan at all, an upcoming divorce is the perfect time to finally take care of this vital responsibility.
This article is a service of estate planning attorney Elliott Feldman and the Elliott Feldman Law Group. 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 Prosperity 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 Prosperity Planning Session and mention this article to find out how to get this $750 planning session at no charge.