Among the events that can completely upend a person’s life is a divorce. Of course, there’s the emotional toll on you and your family with which you will have to contend, but you also have to consider the divorce’s impact on your estate plan.
If you have an existing plan, you likely centered many of its strategies around your spouse. Thus, when divorce proceedings begin, it’s crucial to update your estate plan as soon as possible to avoid unintended outcomes. Don’t wait until the divorce is final.
If you did not have an estate plan prior to the divorce proceeding, it is important to have one prepared during or following the divorce proceeding. In addition, it is important to review life insurance beneficiary designations, annuity contract details, and retirement plan account beneficiaries, so that your former spouse or soon to be former spouse is no longer the beneficiary of those assets. Likewise, you should review the way in which title is held on any real estate in which you have an interest to make sure that title is in conformity with the provisions of any divorce judgment or settlement agreement.
Who’s next in line for your wealth?
Unless you wish to provide your soon-to-be former spouse with an inheritance, amend your will and any trusts to eliminate him or her as a beneficiary. In addition, unless you’re comfortable with him or her administering your estate or controlling your wealth, you should designate someone else as personal representative or trustee. This is a good idea even if you live in one of the many states where divorce automatically nullifies any gifts or bequests to an ex-spouse and automatically revokes an appointment of a former spouse as personal representative or trustee.
There are several reasons for this. First, if you die before the divorce is final — even if you’re legally separated — your spouse will still inherit in accordance with your will or revocable trust, and his or her appointment as personal representative or trustee likely will stand.
Second, typically, the laws in these states treat your estate plan as if your former spouse had predeceased you. If you’ve named contingent or residual beneficiaries, any property your spouse would have received will go to them. If not, the property will pass according to the laws of intestate succession (i.e., the state statutes write the will). But relying on these laws can be dangerous.
Finally, keep in mind that, in many states, as long as you’re legally married, your spouse will retain an elective share or community property rights to a portion of your estate. So while updating your plan soon after you decide to divorce can reduce the amount your spouse will receive if you die while you’re still married, it can be difficult to disinherit him or her completely before the divorce is final. However, the proper use and funding of a Revocable Living Trust might address this concern.
Seek peace of mind
If you’re going through divorce proceedings, contact us. We can help review and revise your estate plan to ensure that the proper heirs are provided for in the event of your death.