Divorce is never easy. There is always a laundry list full of things that you need to be dealing with or thinking about during this time. One very important item that typically isn’t at the top of the list is to review your estate plan. Chances are, when you originally set up your estate plan, it gave your spouse full control and named them as the primary beneficiary of your assets.
While some states have laws that would interject and remove the spouse, other might not. In fact, the law may not cover everything or may not turn out the way you would have wished.
So, where do you start? Take inventory of the estate planning you’ve already done. The main items will be a will, power of attorney, trust, and advance directives. You’ll also want to review how you’ve listed beneficiaries on retirement accounts and insurance policies.
Let’s look at each of the primary estate documents first and identify specific areas to address in each:
- Will: Who is your executor? Most likely, you have named your spouse as the executor. As mentioned above, there are laws that may remove an ex-spouse from acting as your executor. However, these laws might not go into effect until after the divorce is final. If you pass away during a divorce, it will be your soon-to-be-ex that will be handling your estate. Do you want this person executing your final wishes? Also, you may have changed your mind about who and what is listed within the will. While anything that goes to your ex may be removed by law, anything going to your ex-sister-in-law, for example, will remain.
- Power of Attorney: Let’s say you have decided to file for divorce but have not yet officially filed. Your spouse will still have the power to act on your behalf if you gave the right to do so in your POA document. Are you comfortable with your soon-to-be-ex having that authority? Unlike the will, the law will typically remove the spouse when divorce is filed. If you have not filed yet, though, your soon-to-be-ex may still have authority. Also, laws vary by state, so it is important to discuss this matter with your attorney.
- Trust: Have you named your soon-to-be-ex as a beneficiary of the trust? Some trusts may have provisions within the trust to remove your ex. What happens until the divorce is finalized? Irrevocable trusts are different. Let’s say you named your spouse as a beneficiary of an irrevocable trust. You are not able to remove your spouse if you specifically named him or her. You could have created provisions that your spouse becomes a beneficiary at the time of your death. This will protect the assets after the divorce, but not before it. Lastly, if you have minor children, how will the trust be administered and who can make those decisions as trustee after you are gone? How will the assets be distributed? For example, does the trust dictate that a specific portion is spent on education, weddings, or home purchases? The trust language can also protect the assets if you are remarried at the time of your death.
- Advance Medical Directives: A medical directive may express your wishes in a medical situation, if you are unable to communicate. It may also appoint a person to represent you and make medical decisions. Make sure you review the document and update it if needed.
Estate planning may be a hard subject to approach when you’re already going through a very difficult time, but it is necessary. You should update documents and review your final wishes, in the event you pass away prematurely. Your attorney can provide the legal advice you need to properly adjust the documents so that they meet your new wishes.
Careful review will ensure a smoother process for your loved ones. An estate planning attorney who is well versed in this area can make sure you are making crucial updates.
Also, remember that state laws can vary based on where you live and where you own property, so you may be affected differently during and after a divorce depending on these factors. Again, it is important to seek counsel from an estate planning attorney who would understand the process.
Divorce is a challenging time for everyone involved. If we can help you in any way, please contact us.
Chad E. Foster, Financial Advisor
Chad is a CERTIFIED FINANCIAL PLANNERTM practitioner and is a Certified Divorce Financial Analyst® professional.