Divorce is difficult. There’s no way around it. Even in the best case scenario, when both parties are 100 percent in agreement and things are as amiable as possible, a million things are going to change in your life, seemingly all at once. And that’s hard.
One of the biggest changes you’ll need to deal with either during or right after your divorce is your Estate Plan. Your needs, priorities and goals in life will most likely all change course a bit, and your plans must reflect that.
If you’ve been recently divorced, now is the time to revisit and most likely update your Will or Trust (or create your first, if you haven’t already).
We’re here to cover all the basics about how to handle your Estate Plan after a divorce. So read on to learn:
How to Update Your Estate Plan After a Divorce
If you’ve just gone through or are going through a divorce, Trust & Will is here for you. As Estate Planning experts, we can help you navigate the process of updating your documents so that they represent your new life and future. After all, it’s always good to have a pro on your team - and we’re here to walk you through the process.
There are several important documents within your Estate Plan you’ll want to review and possibly revise after a divorce. Walk through this list to make sure your plan is up to date and accurate, despite the changes that you’ve recently experienced in your personal life.
Revoke your Will
Update your Healthcare Proxy
Name new beneficiaries and Powers of Attorney
Consider a Trust
Revisit guardianship for minor children
Review your prenuptial (or postnuptial) agreement
Understand your Life Insurance policy
1. Revoke Your Existing Will
If you didn’t previously have one with your spouse, post-divorce is a great time to create a Will. However, if you started your Estate Planning with your former partner, you’ll want to update your Will appropriately once your marriage ceases to exist. For example, if you had your husband or wife appointed as Executor of your Will, you most likely would want to change this.
Likewise (we’ll go more into detail on this below), you may want to review who you chose as guardian for your children. If your divorce was civil and you are still making co-parenting decisions with your former partner, you may be OK leaving things as they were originally written.
But at the very least, you want to review what was documented and make any changes you feel necessary. Keep in mind, some states have laws about what happens to certain parts of an Estate Plan after a divorce, but you don’t want to assume or rely on this.
*Important consideration: Consider removing your former spouse from the role of Executor (and/or Trustee) if you have a Trust.
2. Update Your Health Care Proxy
Similar to your Will, you likely appointed your husband or wife to be your Healthcare Proxy - meaning he or she would have the authority to make healthcare-related decisions on your behalf. It’s perfectly legal to leave this as is, but of course it would depend on your post-divorce relationship.
*Important consideration: A Healthcare Proxy would step in to make these decisions if you were ever incapacitated and couldn’t voice your own wishes. A great deal of trust needs to be there.
3. Name New Beneficiaries and Powers of Attorney
You already know that your named beneficiaries will receive assets or money from your Will or Trust, but don’t forget about updating other accounts or parts for your Estate Plan, like:
Life insurance policies
Retirement accounts - IRAs and 401Ks
Pay on death accounts (also known as TOD accounts)
Etc.
Note that individual states may have different requirements and laws about handling beneficiaries after a divorce, and your actual divorce agreement may stipulate some things as well.
You should also review who you had given Power of Attorney to. If you designated your ex-spouse as either Medical or Financial Power of Attorney, you may want to revisit that decision.
*Important consideration: Be sure you understand what was agreed to per the terms of your divorce so that your estate doesn’t end up in litigation if parties disagree after you pass away. And it’s always a good idea to sign new forms with current dates to show you updated things after your divorce - even (or maybe especially!) if you keep an ex-spouse as a primary beneficiary or stakeholder.
4. Consider a Trust
After a divorce, if you don’t already have one, setting up a Trust to handle alimony and child support and to direct funds to your heirs may be a smart move. Trusts can also be beneficial if you don’t want your ex-spouse to be your children’s guardian if you become incapacitated or pass away. If this is the case, a Revocable Trust can name someone other than your former husband or wife as Trustee. You can also legally appoint a Trustee to control money and assets in your estate for the benefit of your children if you die.
*Important consideration: Again, it’s important to remember that these rules likely differ state to state - you want to check the laws in the state you reside and were divorced in.
5. Revisit Guardianship for Minor Children
If you’re going through (or went through) a particularly contentious divorce, or if your ex-spouse struggles with current addiction or substance abuse problems, your guardianship documents will be an important part of your Estate Plan to update. If you have valid concerns about how fit your ex-husband or ex-wife would be as the sole provider for your children, you should put your grievances in writing and keep the document with your other Estate Plans.
*Important consideration: While it’s not always easy to remove custody from a biological parent, by putting things in writing, a judge will be able to at least review your concerns when and if the time ever comes.
6. Review Your Prenuptial (or Postnuptial) Agreement
If you’re about to begin your divorce and have a pre or postnuptial agreement, you should review what you agreed to in the original document to see if your spouse is entitled to anything.
*Important consideration: If you’re planning to remarry (either now or in the future), a prenup could potentially be a smart move.
7. Understand Your Life Insurance Policy
Review your Life Insurance policy or policies so you’re very clear on how any policies are paid for and what they guarantee.
*Important consideration: You may not need to do anything, but you should at least have a firm, clear understanding of what the policies state and who is both responsible for, and will one day benefit from, them.
Finally, be sure to go back through your entire Estate Plan one more time after your divorce is legally finalized. And, as always, you want to review and update your plan regularly every three to five years, or whenever you have a major life event.
Estate Planning and Divorce - Commonly Asked Questions
Divorce can be complicated and stressful, but understanding as much as you can about the process and repercussions can help. Below are the most commonly asked questions about navigating a divorce and Estate Plans.
Are Any Assets Safe from a Divorce?
While in general most or all property and assets are subject to scrutiny during a divorce, there is an effective strategy you may be able to use for asset protection. Using what’s known as an Offshore Asset Protection Trust, which holds an international LLC, you can place all your investments into an international bank. This is one of the strongest strategies you could use for asset protection in a divorce.
What Happens to my Trust after Divorce?
What happens to your Trust after a divorce will largely depend on the type of Trust you initially set up with your former partner (or that you had when you were married). If the Trust was Irrevocable, most often you won’t be able to change it. If it was a Revocable Trust, just like any other asset, it will need to be divided.
Is a Will Still Valid after Divorce?
In most states, if you set up a Will while you were married, any gifts designated to go to your former spouse would be revoked automatically upon a divorce. For example, in California, unless otherwise explicitly stated, state law says that any annulment or dissolution of a marriage automatically revokes any bequests your Will made to your former spouse.
Other states, such as Arizona, take this step even further and will also automatically revoke gifts made to a former spouse’s family members. If you intend to leave gifts to a former spouse or his or her family, you definitely want to create a new Will entirely. With the signature being dated after the divorce is finalized, less questions will be raised during the distribution of assets.
No, divorce is never easy. But knowing how to handle the Estate Planning side of things after the dissolution of a marriage can help you move forward.
And remember, divorce isn’t the only time you should assess your Estate Plan. A good rule of thumb when it comes to updating estate documents is to do so every three to five years, or after any major life event like a marriage, a divorce, a birth of a child or a death. And if you’re looking for a more in depth breakdown of exactly how to go about making changes to your Estate Plan (regardless of your situation), check out our guide on How to Amend Your Will.
Going through a divorce or recently divorced and need help with your Estate Plan? Trust & Will is here to help! Whether you need to create a new Trust or Will or you need to revise your existing plan, we’ve got you covered. See everything we have to offer, here.
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