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Divorced? Don’t Forget to Update Your Estate Plan!

Written by: Bradley R. Coppedge,Esq.

In the stress and aftermath of a divorce, whether amicable or contested, an often overlooked topic is the importance of promptly updating one’s estate plan.  Failure to do so can lead to some unintended or even unbearable consequences. Let’s take a look at some of the key issues…

1) Last Will and Testament.  As I’ve said many other times, everyone needs a Will. (See my January 2017 article https://hallboothsmith.com/8-common-myths-about-last-wills-and-testaments/).  A Will makes the administration of your estate easier on your loved ones, ensures your property passes to whom you want, and in the manner you want (such as outright or in trust), and avoids unintended results that can occur under state law if you die intestate (without a Will). It also makes the estate administration process easier and less expensive than if you die intestate. You may ask, “but doesn’t a divorce revoke my old Will?”.  The answer there is “well, sort of”. That is to say, a divorce treats a former spouse as having predeceased you for purposes of your Will, but does not actually revoke the Will. And in this regard, the termination of a marriage likely has a bearing on other bequests you would make, your selection of the Executor, and other issues.

2) Power of Attorney.  If you do not have a financial or general power of attorney, you should, especially now that you are divorced!  And if you have one that was executed during your marriage and your spouse was named as your agent, it is no longer effective as to your spouse.  So that is the good news.  But do you have provisions as to whom the successor is? And has that changed with your divorce?  And do you really want your former spouse’s name still in the document?  After all, a third party might rely on that document not being aware of the divorce.

3) Advance Directive for Healthcare. Same arguments as above, but perhaps even more so.  Even without an Advance Directive, many health care providers will still rely on directions for your health care from a spouse if you are not able to express your health care preferences.  But after a divorce, this ‘courtesy’ does not generally extend to children or other family members.  Should you be in a situation where you can’t make your own medical decisions (coma, unconscious, under anesthesia in surgery, incompetent, etc,), without a valid Advance Directive the only way another person can make decisions for you is by going through a time intensive and costly guardianship proceeding in probate court. And in an emergency or time sensitive situation, that process won’t help.

4) IRA and Life Insurance Beneficiary Designations.  A divorce severs all rights and relationship between the parties, right? Wrong. Beneficiary Designations is one area that is unaffected by the divorce.  Thus, if your now ex-spouse is the designated beneficiary on any life insurance policy, IRA, 401k, annuity, or similar financial product, or the POD (pay on death) designee such as on a CD or financial account, then he or she will remain the beneficiary if you do not make an affirmative change.  This is very different than the result with a Will.  Thus, even if you change your Will, and even if your Will directs otherwise, it is always the beneficiary designation that controls.

5) Trust vs. Custodial Arrangement.  If you have minor children, you will presumably want your property to pass to them in trust if they are minors (or maybe even young adults) at the time of your death. Your Will can provide the terms on which your children receive the benefit of your property, as well as designate who will be the Trustee of those funds for your children’s benefit.  If you do not have an updated Will that addresses this, there is always the chance that your former spouse ends up in control of the funds by way of a conservatorship or a custodial account.  And for some people, this is ok; for others, this is an unbearable thought and the last thing in the world they would want to see happen. Additionally, if you die intestate, or if your Will does not affirmatively create a trust for the children, then the children are entitled to the funds outright at age 18 or 21.