Estate Planning After Divorce 2

When married couples execute wills and other estate planning documents, they generally leave a majority of their assets to their spouse (especially in the case of a first marriage) and name their spouse as the decision-maker for financial and healthcare decisions in the event the other spouse becomes incapacitated. Divorcing or divorced couples, however, probably no longer want their estranged spouse as the designated beneficiary of an estate or trust or as the designated decision-maker in a “living will”.

Bequests to Ex-Spouses Revoked Upon Divorce

When a divorce is final under the law, most states have laws which automatically revoke certain probate and estate planning documents as to a deceased person’s ex-spouse. (During the pendency of a divorce case, however, an estranged spouse could still inherit his or her deceased spouse’s separate property or be in the position of making major medical decisions if the other spouse becomes incapacitated. You will want to discuss this with your divorce attorney and determine how best to address the issue in your particular situation.)

After the divorce is final and any bequests to an ex-spouse are revoked by law, what was his or her interest in your estate will then pass to any secondary beneficiaries under your will or under intestacy statutes. If you wish to provide for specific bequests to an ex-spouse even after a divorce, your will should be amended or restated to explain that in detail.

Execute New Will/Trust/Power of Attorney

It is probably best practice though to execute a new will and/or trust. If your children are still minors, you may want to investigate a trust – as they will not be able to inherit your estate outright until they reach the age of majority. A trust will avoid the need for your family to go to court and establish a conservatorship (answerable to the court) to maintain your children’s inheritance for them until they reach adulthood.

You will also need to designate a guardian for any minor children (If you share custody of your children with your ex-spouse, they will be in his or her full custody in the event of your death. But you will want to designate a back-up in the event that your ex-spouse predeceases you while your children are still minors.) Any health care power of attorney you may have should also be updated, authorizing someone else to make medical decisions for you in the event you are not able to do so.

Estate Planning Upon Subsequent Marriages

If you remarry following a divorce or death of a spouse and you have children from the first marriage, you should pay very close attention to how your estate plan treats both your children and your spouse. It may be best to create a trust in addition to executing a will.

For the couple who marries later in life and has no children together, a trust can provide a place to live and income for the surviving spouse during his or her lifetime. Upon his or her death, the estate would pass to the children of the first marriage (and not to the surviving spouse’s children from another marriage). If no trust is in place to do this, the deceased spouse’s children from a first marriage could receive nothing from their mother or father’s estate, as the estate, including personal items and the family home, would likely pass to the second spouse (and then to his or her children upon his or her death).

For the couple who have children from previous relationships as well as together, a new will and trust can specify how your assets are to be distributed between your spouse and all children, making sure that children from your first marriage do not get unintentionally disinherited. A trust can even ensure that your children’s potential ex-spouses do not have any claim to your estate upon your passing.

Change Beneficiary Designations

Don’t forget your beneficiary designations when reviewing your estate planning. Your retirement accounts, life insurance or annuities will all pass outside of probate court upon your death. For those assets, you must designate an individual or a trust (depending on the specific asset in question) as beneficiary to whom the asset will be transferred upon your death. You may also have bank accounts designated with a payable on death (or “P.O.D.”) beneficiary. The person named as POD beneficiary gets the funds in that particular account when you die.

Like wills, such designations are generally automatically revoked upon divorce. However, you should review your secondary or replacement beneficiary designations upon divorce, especially if your minor children are named as beneficiaries (see discussion of trusts above).

Additionally, some employee benefits and pension plans will not automatically terminate a former spouse’s interests if he is named as the primary beneficiary on a plan or benefit program (even if you are divorced). You must make sure that the beneficiary designations are changed following the applicable procedure required by federal law.

Be sure to discuss estate planning issues with both your divorce attorney and your estate planning attorney without delay.

Discussion

2 Responses to “Estate Planning After Divorce”

Leave a Reply

Your email address will not be published.