Getting divorced can be an overwhelming process that has the possibility of impacting every aspect of your life – including estate planning. You may be so overwhelmed by the process that you overlook the critical implications that your newly divorced status can have on your assets and your estate plan.
Failing to update your plan for divorce can have a number of potentially tragic consequences. To be frank, your divorce attorney may not inform you of these possibilities because they may not be knowledgeable of that area of law. Whether you have already started the process or you have decided that you will do so in the near future, you must give consideration to your estate plan. Even if you have not started the process, now may be the most ideal time to do so.
You must remember that 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! This is generally an unwanted outcome that can easily be avoided by speaking with an estate planning attorney at North County Legal.
Here are just a few of the critical steps to take if you are in the process of getting divorced or are intending to do so in the very near future.
Update Your Power of Attorney Documents
As mentioned above, if you were to become incapacitated before your divorce is finalized, your soon-to-be-ex-spouse 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, even if you have not yet started the process in court.
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 documents in place, your spouse has priority to make financial and legal decisions for you. 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 you and your spouse.
Once divorce is a sure thing, don’t wait! Immediately contact your attorney at North County Legal to support you in getting these documents updated. We do not recommend relying on your divorce attorney to update these documents for you unless they are an expert in estate planning. 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 from scratch, after a thorough consultation with you.
Update Your Beneficiary Designations
As soon as you know you are getting divorced, you should 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 life insurance policy to name your new spouse, the ex you divorced 15 years ago could end up with a payout upon your death. It’s important to note that there are restrictions on changing beneficiary designations after a divorce is filed, so 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 first priority.
Create a New Will
We do not recommend waiting until after your divorce is finalized to update your will. In fact, you should create a new will as soon as you know for certain that you will be getting divorced. , In some cases, you may not be able to make these changes once papers have been filed. Most married couples name each other as their executor and the beneficiary of their estate, so it’s extremely important to name a new person to fill these roles, if you don’t want your soon-to-be-ex-spouse handling your estate.
When creating a new will, you have the opportunity to reconsider what you would like to happen to your assets upon death. You may wish to name new beneficiaries and may be desirous of removing your former spouse altogether. It’s important for you to know 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.
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 an attorney as soon as you know divorce is coming. After an initial consultation, we can help you understand the laws affecting you and your estate. We will also advise you on how to best navigate these laws when updating your will.
Amend Your Existing Trust or Create a New One
Many people have set up revocable living trusts with their spouse as beneficiary. Like wills, the laws governing how a divorce will affect a trust can vary. We recommend scheduling a consultation as soon as possible if you are contemplating divorce or if you have already started the process.
If you don’t have a trust in place, we would love to talk to you about creating one. This instrument is especially useful for parents of minor children. A trust can provide a variety of features and powers that a will cannot. Trusts have proven especially helpful for blended families. Given the possibility of you and your spouse forming new families after the divorce, this is something you may wish to consider. A living trust is a valuable method of protecting the assets that you want to pass on to your children.
After the Divorce
Once your divorce is final and the matrimonial property has been divided, 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 Today
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. At North County Legal, we support clients during this difficult process to ensure their best interests are secured.
Contact us today to get started with your consultation.