Post Divorce Estate Planning

Post divorce estate planning is a critical yet often overlooked aspect of post-divorce planning. Divorce not only alters your personal life now, but can have far-reaching impacts.

Outdated documents often cause wide-ranging legal consequences and unnecessary legal costs to resolve issues. This is especially problematic with time-sensitive matters such as end-of-life decisions.

You need accurate documents dictating how assets are distributed, who controls finances, and who makes critical healthcare decisions. Updating your Will, Trust, Powers of Attorney, and Healthcare Directives after a divorce is vital.

Failure to update these documents can result in unwanted outcomes. For example, an ex-spouse retaining control or receiving a large portion of your estate. Below is a comprehensive guide on why and how to revise these critical documents following a divorce.

Why Post Divorce Estate Planning Matters

A divorce decree ends the marriage, but it does not automatically update Wills, Trusts, and Power of Attorney documents. Is your ex-spouse still named in your Will, Trust, Power of Attorney, or Healthcare Directive? If so, they could inherit assets or make decisions about your health and finances. Revising these documents is crucial to ensuring your intentions align with your post-divorce life.

Changing Your Will after Divorce

Legal Impact

Typically, a divorce generally does not automatically remove an ex-spouse as a beneficiary. Certainly, without modifications, a legal claim could be argued in court. As a result, if you do not update your Will post-divorce, your former spouse could still inherit your assets according to the terms of the (outdated) Will. This is true even if it contradicts your post-divorce preferences.

Practical Steps

Draft a New Will: For certainty of outcomes, it is often preferable to revoke your existing Will and create a new Will. In any event, periodically reviewing your estate planning documents is a good idea.

Codicil Amendment: Many people choose to update their Will with a codicil. A codicil is a supplementary document that modifies specific parts of an existing will. A codicil can be implemented to an existing will without revoking an existing Will. This provides a legally recognized update while avoiding the cost and time for creating a new Will.

Destruction of Old Documents: To avoid the potential for later confusion or conflict, you should destroy outdated documents. This can mitigate time delays and costs from your documents being contested in probate court.

Common Oversights

Most people overlook updating their Will and Trusts after a divorce. This eventually leads to legal disputes, delays in estate administration, or unwanted outcomes. In most situations, facts, accounts, and finances have changed since the documents were created.

Since your Will was written, have people died or been born that you would like to include? Do you have a new significant other? Don’t fail to take care of the special people in your life. Contact a family law attorney.

Revising Trusts Post-Divorce

Types of Trusts

Revocable Trusts: Similar to wills, many states have laws that automatically revoke an ex-spouse as a beneficiary and/or trustee from a revocable trust after divorce. However, this is not universal; you must review and amend your trust accordingly.

Irrevocable Trusts: These are more complicated. Most are not easily amended. If your ex-spouse is named as a beneficiary in an irrevocable trust, they may retain those rights unless a court intervenes. Amendments may require judicial involvement and careful legal strategy.

Steps to Take

Create a New Trust or Amend Existing Documents: It is often advised to create new trust instruments to reflect changes in relationships and asset distribution post-divorce.

Update Trustees and Successors: Replace your ex-spouse with a new, trusted person as trustee or successor trustee to manage assets on your or your beneficiaries’ behalf.

Estate Settlement Agreements: Ensure all trust modifications align with the terms of your divorce settlement to avoid legal conflicts.

Asset Review

Following divorce, individual assets within the trust may have changed due to property division. It’s important to update asset schedules to match the reality of what you now own.

Modifying Powers of Attorney

Why Must They Change?

Powers of attorney (POA) grant someone authority to manage your affairs if you are incapacitated. Spouses are commonly appointed agents for both financial and healthcare POAs during marriage. Post-divorce, leaving your ex-spouse in this role is rarely desirable—and sometimes even illegal.

Special Circumstances

If incapacitation happens during your divorce process, the terms of the current documents remain effective. This typically means a spouse retains substantial legal authority. Therefore, when approaching divorce, you should consider updating these documents.

Updating Healthcare Directives

Consequences of Default

A healthcare directive, or living will, lets you specify your treatment preferences and appoint a proxy to make medical decisions if you can’t communicate. If your ex-spouse is named, failing to update this document could result in them holding this crucial authority during a crisis—contrary to most post-divorce wishes.

Post-Divorce Impact

Automatic Revocation in Some States: Many states will automatically revoke a healthcare proxy designation of a spouse upon divorce, but check your state’s law for specifics.

New Appointments: As soon as possible, appoint a new trusted proxy—frequently a family member or close friend. Communicate the changes to healthcare providers and supply updated copies of the directive.

Required Documentation

Healthcare directives are legally binding only when properly signed and distributed. When updating, use your state’s authorized forms and distribute new copies, revoking and destroying old versions.

Additional Considerations

Beneficiary Designations

Certain assets, such as retirement plans, life insurance, and payable-on-death accounts, are not controlled by your will but by designated beneficiaries. Some states automatically revoke a spouse’s designation upon divorce, but this is inconsistent and does not always apply, especially under ERISA and federal law. Review and update these designations independently.

Asset Inventory and Digital Accounts

After dividing property in a divorce, take stock of new assets acquired or retained. Update not only trusts and wills, but also powers of attorney covering digital assets (online banking, social media, etc.), ensuring that powers of access are in trustworthy hands.

Legal Restrictions During Divorce

Some jurisdictions prohibit changing estate planning documents during the divorce process. This isn’t always a bad thing to do. Imagine spending the money to have changes made, and then a judge orders you to change things yet again. The best course of action is to consult an estate planning attorney. This mitigates the potential for violating court rules or divorce settlement terms.

Children and New Family Members

Update guardian designations for minor children and ensure any new relationships or dependents are included in your revised estate plan to provide for their care and avoid legal ambiguity.

Steps to Take After Divorce

Revoke and Replace the Will: If you need to make substantial changes, you may choose to create a totally new Will. Working with a family law attorney can ensure your wording is correct, legally enforceable, and that all important areas have been addressed. Your Will should be notarized and retained in a secure place, such as a personal safe. Upon your death, documents in a safety deposit box may be inaccessible due to laws and regulations.

Create / Modify Trusts: As necessary and prudent, create or change the trustees and administrators for all Trusts. You do not have to have the same person as the administrator on all Trusts. Pay particular attention to disbursement and distribution directives.

Change Powers of Attorney: As necessary, update your Financial Power of Attorney and Medical Power of Attorney to assign new agents.

Update Healthcare Directives: Update your designated healthcare agent (and backup).

Review All Beneficiary Designations: Confirm life insurance policies, retirement accounts, investment accounts, and bank accounts are covered in your latest version.

Communicate Changes: As prudent, provide new documents to relevant parties. This may include family members, insurance agents, etc. Always keep at least two notarized copies for your records, and store them in separate, secure locations.

Consult a Professional: Engage with a family law attorney to ensure updates are legally compliant and reflect your current decisions.

Summary & Key Takeaways

After a divorce, changing your will, trust, powers of attorney, and healthcare directives is often a wise decision. From allocation of assets to the determination of decision-making authority, these documents should reflect your current situation. Specifically, updates can mitigate the potential for an ex-spouse to interfere in important areas of your life.

When entering into, or after, a divorce, updating your healthcare and estate plan should be a top consideration. To ensure that your decisions are legally set, you should work with an experienced family law attorney. Verbal changes and informal written agreements can cause legal problems if later challenged in court.

What is Your Current Situation?

Did your divorce process overlook creating legally enforceable decisions on family planning needs? If so, contact our family law experts to discuss your situation and get the help you need.

Credits &Footnotes

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