Estate Planning and Divorce
Estate Planning and Divorce
This article discusses estate planning and divorce and why it is important to not overlook your estate plan during the chaos of divorce. Divorce is a difficult, complicated, and stressful process, but understanding the impact divorce can have on your estate plan and your potential heirs and updating your plan appropriately should be a part of your divorce todo list.
Estate planning for many people may be the last thing to come to mind when going through the financial stress of a divorce. Others also assume that divorce automatically voids legal documents prepared during a marriage. That’s totally not the case.
During and after a divorce, you must update your estate plan. While dying during your divorce is unlikely, keep in mind that your soon-to-be ex-spouse will also retain control of your financial and healthcare decisions should something happen to you.
That is exactly the type of situation people run into when they don’t properly update their estate plan after divorce.
Estate Planning and Divorce: What Is An Estate Plan
An estate plan consists of several documents which are a will, a power of attorney, a health directive, and, for some, a living trust.
A good estate plan can also protect you and your assets if you become incapacitated or can’t make decisions for yourself. That’s why it’s not true that an estate plan is something that you’ll only need when you die.
Estate Planning and Divorce: Why Update Your Estate Plan?
In every milestone of your life there are many reasons why you need to update your estate plan promptly; most especially divorce. However, you have to understand that going through a divorce isn’t the only time you should update your estate plan.
As soon as you know you're headed for divorce, and you're certain you don't want your spouse to have control of your assets if you die - or your health and financial decisions should you become incapacitated - see an estate planning attorney right away.
Update your estate plan and make sure it reflects these changes.
Here are some steps you can take during and after divorce to make sure your wishes are protected.
Estate Planning and Divorce: Before and During the Divorce
First of all, as soon as you know a split's certain you need to revisit and update your estate plan, not only after your divorce is final.
Here’s why: Depending on the nature of your separation or divorce, the process could take anywhere from a few months to several years. Your marriage is still legal, until your divorce is final.
Which only means that if you become incapacitated or die while battling through the divorce and haven’t updated your estate plan, your spouse, soon to be your ex-spouse, could end up controlling everything, including your assets and your life.
Here are a few of the most important updates you should consider making as soon as the divorce is a possibility.
1. Look at your prenuptial or postnuptial agreement.
Prenuptial arrangements usually outline which assets are viewed as independent and which can be considered conjugal; this could play a role in property designation during the estate planning process.
Did you and your mate sign a prenuptial or postnuptial understanding?
Provided that this is the case, revisit your prenup or postnup arrangements to figure out what you and your spouse owe each other in a divorce.
You must keep the conditions of these arrangements as you make courses of action for your will, trust, or other estate planning documents.
2. Revoke your former will and draft a new one.
Revoking a will and drafting a new one may seem difficult. If you didn’t previously have a will while you are still married, post-divorce is a great time to create a will.
However, if you started your estate planning with your former partner, you’ll want to update your will appropriately once your marriage ceases to exist. Removing your spouse as your executor is one smart move.
On the off chance that your separation was civil and you are as yet settling on co-parenting decisions with your previous partner, you might be okay leaving things as they were initially written.
However, at the very least, you need to survey what was documented and make any changes you feel are important.
3. Determine what will happen with revocable and irrevocable trusts.
Handling trusts during a divorce can be just as complicated. Trusts established while married are typically deemed marital property. These trusts may be split unless one spouse can prove that the trust was intended as separate property.
Another crucial consideration is whether you previously established a revocable or irrevocable living trust. A revocable living trust can be altered once completed.
If you can update your revocable living trust upon deciding to divorce, you should do so as soon as possible.
Unfortunately, if your spouse was listed as a beneficiary in an irrevocable trust, you may struggle to make the changes you so desperately desire.
4. Decide what to leave your spouse.
Would it be a good idea for me to exclude my life partner?
The decision is yours. However, you need to consider that there are interesting things to consider. In numerous states, full disinheritance isn't so much as a choice until after the separation has been finished, regardless of whether you write your ex out of your will.
On the off chance that you did, your ex might challenge your will and possibly might be qualified for up to half of your estate.
5. Consider guardianship of your minor children.
The main reason that numerous guardians of little youngsters make wills is to name a guardian, who might bring their kids up on the improbable occasion neither one of the parents could.
If you have children under 18, that is presumably one explanation you need to make a will. This can be utilized to assign guardians for your minor youngsters if you die before they arrive at adulthood.
Assuming you're going through or went through a quarrelsome separation, you don't want your ex-spouse to raise your children in the event of your untimely death. So, you need to designate somebody else for this important role.
Your guardianship documents will be an important part of your Estate Plan to update. Record your reasons in a letter and connect it to your will. It will in any event give the appointed authority such as the judge an interesting point if opportunity at any point arrives.
6. Update your power of attorney.
Financial power of attorney gives somebody the position to settle on monetary choices for your sake when you can't do as such.
Regularly, spouses award each other stable financial power of attorney, in this way leaving monetary decisions to one another.
This influence can be exceptionally wide and can incorporate the option to sell your assets and eliminate cash from your bank and investment accounts.
Presently, as a part of your post-divorce financial planning, you'll need to choose somebody you trust to take on this job.
7. Update your health directive.
A health directive permits you to name somebody to settle on medical care choices for you, on the occasion, you can't do as such for yourself.
In the estate plan you had when you were married, you in all likelihood named your spouse as your medical care proxy. What occurs on the off chance that you become debilitated by disease or injury while amidst the divorce process?
Do you want your ex to make critical decisions regarding medical procedures or hospice care?
If not, you must modify your medical power of attorney as quickly as time permits. It merits changing your force of lawyer ahead of time, as automatic revocation does not occur until the conclusion of the divorce.
On the off chance that you failed to update your estate plan during the divorce process, it's advised that you do as such when your separation is finalized.
If you have effectively refreshed your will or other estate planning documents, additional amendments might be needed as of now.
1. Revisit recently amended estate planning documents
Estate planning during divorce is frequently a temporary measure. In some cases, it's difficult to make final decisions during a pending separation, and sometimes it's not even possible.
Take a closer look at any progressions you made during the beginning phases of your divorce to determine if extra updates are warranted. Additionally, don't neglect those beneficiary designations.
Keep on checking your estate plan, as unforeseen issues may emerge in the months and years following your divorce.
2. Change beneficiaries for retirement accounts designation.
In many states, retirement account recipients can't be changed during a pending divorce. After divorce, however, you can continue with acclimations to recipients for accounts controlled by the Employee Retirement Income Security Act of 1974 (ERISA).
A perfect representation of an ERISA-controlled record is your 401(k). Those assignments frequently should remain set up until the divorce is final.
While a will is a fundamental part of each estate plan, numerous kinds of assets will pass from you to your intended recipient via a written beneficiary designation.
To name a new individual to inherit these assets, you'll need to demand new recipient designation forms from your bank, brokerage company, or manager, and return them as quickly as time permits.
Keeping your beneficiary designations current is an important part of post-divorce financial planning.
3. Make new power of attorney
Powers of attorney—documents that give someone authority to represent you if it's consistently vital—are a major piece of an estate plan.
On the off chance that you as of now have the power of attorney that gives your previous spouse the power to make decisions for your benefit, revoke them and make new documents.
You can give notice to your present life partner of the renouncement. This is regularly done through your lawyer.
You ought to likewise execute another force of lawyer naming a new power of attorney naming a friend, relative, or trusted advisor to go about as your representative regarding your finances and assets.
Need help with your Estate Planning and Divorce? Call Andrea Aston!
I’m Andrea Aston, an experienced estate planning attorney in Southern California who can help you with your estate planning and divorce needs.
Whether you need to create a new Trust or Will or you need to revise your existing plan, I’ve got you covered. I’ll find the best plan to protect yourself, your children, future financial health, and others who depend on you and honor your wishes for how assets will be distributed to those you love.
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