Divorce estate planning is an essential part of a divorce. Estate plans created during your marriage should be reviewed with new estate planning documents. If you don’t update and revise your estate plan, your ex-spouse may inherit your property. If your ex-spouse remarries, her new spouse and children may inherit.
Your Last Will
After a divorce, the best way to review a will is to make a new one and revoke the old one. Revoking the old will can be done by destroying it (for example, by tearing it apart or burning it), or by stating in the new will that you are revoking all previous wills.
If you made a will before you divorced, the law in most states says that any gifts to your spouse are automatically revoked from the divorce. However, your spouse’s gift will go to an alternate or residual beneficiary, which may not be what you want. Therefore, it is best to make a new will that reflects your current wishes. This should include the persons or entities to whom you wish to receive your property, the person you wish to be the executor of your property, and the person you wish to be the guardian of your minor children and their property.
If you die and your ex-spouse is still alive, your ex-spouse will most likely receive custody of your children. Only if both parents have died or if the surviving parent is found to be ineligible, a court will appoint a guardian. The court is not required to follow your choice of guardianship, but it often will. If you have custody of your children and do not want your ex-spouse to have custody in the event of death, you should put your reasons in writing and attach this statement to your will for the judge to consider.
As with a will, a new living trust must also be created after divorce. If you have minor children, your minor children may be beneficiaries of the new trust and your former spouse may be prevented from controlling their assets.
You can designate the new trust as the beneficiary of various assets, such as pay-on-death bank accounts, death transfer brokerage accounts, and life insurance policies.
If the divorce decree allows a party to remain in the family home (usually for life or until the minor child reaches the age of majority), a trust can also be used to protect the property from creditors or a future fiduciary spouse.
Depending on the circumstances and objectives, it may be necessary to establish more than one trust.
Beneficiary Designations on Your Estate Plan
Your spouse is likely designated as the beneficiary of various bank and other financial accounts, life insurance policies, and possibly real estate and motor vehicles if your state allows it. It will be necessary to change the designation of these beneficiaries. If you are creating a new living trust, you may want to name the trust as a beneficiary, especially if you have minor children. If not, a minor beneficiary will need a guardian and the court may appoint the former spouse.
To make a change to the beneficiary, you will need to obtain the necessary forms from your financial institution, brokerage firm, or employer.
Financial Power of Attorney
A financial power of attorney can give your agent extensive powers, such as selling your property and removing funds from your financial accounts. If you have appointed your spouse as your agent on any financial power of attorney, you should immediately execute a power of attorney revocation document and deliver a copy to all of your financial institutions. This can be done even while your divorce lawsuit is still pending. If you feel it is necessary, you can perform a new power of attorney by appointing another trusted person as your agent.
Health Care Documents
If you have a health care power of attorney (sometimes called an advance directive, designation of a patient advocate, or health care surrogate), you have probably appointed your spouse to make medical care decisions for you. You can revoke the document or run a new one by appointing another trusted person as your agent. This can be done while your divorce lawsuit is still pending. Your health care provider must be notified of the change.
Other Considerations on Your Estate Plan
If your parents have a succession plan that lists you, your children, or even your spouse as beneficiaries, they should also review their plan. You may also need to rewrite your documents to keep assets out of the hands of your ex-spouse.
For any property with a title deed (real estate, motor vehicles, boats, etc.), be sure to change the titles to reflect that you or your spouse are the new owners.
Divorce considerations in estate planning include re-evaluating the entire plan and preparing and executing new documents. This must be done as soon as possible.