Estate planning during divorce might not be among your top concerns during all the stress, decision making, and adapting to a post-marriage “new normal.” Nonetheless, divorce and estate planning are inevitably linked and demand the due diligence of divorcing spouses to ensure key documents are updated. Those essential papers include wills and trusts, powers of attorney, and retirement account documents.
Wills and Trusts
It is especially important during a divorce to prepare or update a legally valid Last Will and Testament. In fact, it is common and usually prudent to remove your spouse as a beneficiary as soon as possible once divorce proceedings begin. What’s more, if you do not already have a will, divorce can be a suitable time to prepare one. Why? Because if you die without a valid will, your spouse is entitled, in most states and cases, to inherit your estate automatically. This is called dying “intestate.” Merely revoking your current Last Will and Testament without drafting a new one could, therefore, result in your spouse getting more of your estate than previously desired or directed.
Regarding trusts, any rights, restrictions, and proper courses of action can vary depending on the type of trust and how it is structured. Certain trusts, such as an irrevocable living trust, for example, cannot generally be changed. Such a trust is typically designed to protect the interest of minor children in the marriage with the spouse generally designated to control the trust until a child reaches the “age of legal majority” (18 years old in nearly all US states).
A revocable living trust, on the other hand, can normally be revoked or amended in keeping with the terms of the trust. If you are the sole grantor of the trust, you can usually remove your spouse from the trust. However, if you and your spouse jointly granted the trust, divorce may invoke certain rules and restrictions.
Regardless of the types of wills or trusts governing assets and family matters, consult with your estate planner and/or your divorce or probate attorney as soon as possible to make sure your interests are protected.
Powers of Attorney
Other essential estate planning documents include powers of attorney. Authority designated by a power of attorney document (or POA) generally terminates at the time of death or incapacity of the covered individual. A durable power of attorney document, however, remains in effect even if the covered individual becomes incapacitated mentally or physically.
The two most common and important POA documents cover financial matters and healthcare or medical decisions. It is critical to update these as part of your estate planning during a divorce. For most divorcing spouses, it is no longer appropriate or wise to have the spouse retain POA rights. Even during the divorce proceedings (before the divorce becomes final), it often makes sense to designate a new and trusted adult for each POA to make financial and medical decisions on your behalf if you become unable to do so. Discuss this responsibility with the new designee beforehand to make sure they know what would be expected of them. Whereas your former spouse might have understood your wishes, your new designee (or designees), might not. For example, regarding medical decisions, make your wishes clear regarding extraordinary care, including end-of-life and “Do Not Resuscitate” decisions. Of course, be sure to revoke any prior POAs when drafting new ones. Your estate plan issues divorce attorney can help you coordinate the content and timing of these documents.
Retirement Accounts
As with most life insurance policies, retirement accounts do not necessarily remove the ex-spouse as a beneficiary once the divorce is final. Therefore, it is critical to update any governing documents as soon as possible. However, as retirement accounts often become part of the asset accounting, rulings, and eventual disposition in divorce, consult with your attorney to coordinate timing and other requirements.
Key Takeaways:
Estate planning during divorce adds complexity to many divorce proceedings but is a critical component of fair and equitable asset disposition. To protect your interests, make sure you do the following:
- Consult with your estate planner and/or your divorce or probate attorney as soon as possible to make sure all relevant documents are reviewed and properly updated
- Update your will to remove your spouse as a beneficiary as soon as possible once divorce proceedings begin
- If you do not already have a will, prepare one so your spouse doesn’t benefit if you should die intestate
- Understand the provisions and restrictions of any trusts in effect; make allowable changes to remove or limit the involvement or authority of your spouse.
- Update current, or create new, powers of attorney documents to limit or eliminate any authority your spouse might have previously held
- To remove your spouse as a beneficiary, update any governing insurance and retirement documents as soon as possible
At Ciyou & Dixon, P.C., we have 25+ years of experience successfully advocating and resolving divorce cases for our clients. To learn more about how to navigate estate planning during divorce, contact us today at 317-972-8000. We’re here for you.
This blog post provides general educational material about divorce and estate planning. Being an educated legal consumer can help you make the most of the legal experience in meeting your legal objectives. This information is presented by attorneys at Ciyou & Dixon, P.C. who practice throughout the State of Indiana. It is not a solicitation, nor is it intended to provide specific legal advice. Information contained herein is subject to change. This is an advertisement.
