After a divorce, you may find your estate plan is all of a sudden outdated. You have assets that, upon your death, could be distributed to your now ex-spouse. Thus, after a divorce, it is important to consider changing your will, trust, power of attorney documents, and beneficiary designations.
Now, in most states, if you get a divorce and do not update your will, your ex-spouse will be treated as if they have predeceased you, thus any designations they might have had would no longer apply. However, you should be aware that even though your ex-spouse may be automatically disinherited under state law, their children and other family members will not be. If you live in one of the states that does not automatically disinherit your ex-spouse, they may end up inheriting your whole estate (this is also true if you die before the divorce is finalized).
How To Update Your Estate Plan After a Divorce
A major life event such as divorce is a good reason to review and update the important documents within your estate plan. To start, you’ll want to go through the following list to ensure that, despite the changes that you’ve recently experienced in your personal life, your documents are updated to reflect how you might now want to distribute your assets and designate beneficiaries:
- Revoke your Will
- Update your Healthcare Proxy
- Name new beneficiaries and Powers of Attorney
- Consider a Trust
- Revisit guardianship for minor children
- Review your prenuptial (or postnuptial) agreement
- Understand your Life Insurance policy
Revoke your Will
Start by revoking your old will. You can simply destroy it to pieces – literally. However, due to the possibility of there being other copies around, it isn’t a bad idea to revoke your will in writing. Most wills include language that revokes all previous wills.
Now, some exes may remain close even after a divorce, especially if they are co-parenting. If that is your situation, you may still want your ex-spouse named as the executor of your will so ultimately your new will always plan out what is best for you and your family.
Update Your Health Care Proxy
A healthcare proxy allows decisions to be made on your behalf with respect to your healthcare if you were ever incapacitated and couldn’t voice your own wishes. In marriage, it is common for your spouse to have this role appointed. Depending on your post-divorce relationship, this may or may not be something you want to update. Ultimately, it should be someone with tremendous trust to look out for your best interest.
Name New Beneficiaries & Powers of Attorney
Powers of Attorney (POA) documents give someone authority to act for you if it’s ever necessary. There are POAs for healthcare (medical decisions) and for financial matters. If you already have powers of attorney that give your former spouse authority to make decisions on your behalf, revoke them and make new POAs.
Separate from your will, there are other accounts in which you name beneficiaries that you may want to review and revise such as:
- Life insurance policies
- Retirement accounts – IRAs and 401Ks
- Pay on death accounts (also known as TOD accounts)
Set Up a Trust
Another thing to consider after a divorce, is setting up a trust to handle alimony and child support and to direct funds to your heirs. Additionally, a trust can also be beneficial if you don’t want your ex-spouse to be your children’s guardian if you become incapacitated or pass away.
Revisit Guardianship for Minors
Guardianship for minors can be particularly important to reconsider if you are going through (or had) a contentious divorce. Though it’s not always easy to remove custody from a biological parent, if you have valid concerns (i.e. addiction, abuse, etc.) about how fit your ex-spouse would be as the sole provider for your children, you should put your grievances in writing and keep the document with your other estate plan to assist a judge to at least review such concerns, if need be.
Review Prenuptial (or Postnuptial) Agreement
If you have a pre or postnuptial agreement, and are getting started with a divorce, you should review what you agreed to in the original document to see if your spouse is entitled to anything. This is one of the reasons why a prenup could potentially be a good idea if you plan to remarry.
Review Your Life Insurance Policy
You may not need to do anything with respect to your life insurance policy, but you should take this time to review, and be clear about what the policy states as to who benefits from it and what they guarantee.
What Happens to a Trust After Divorce?
Depending on the type of trust you set up with your ex-spouse, will determine what happens post the divorce. If the trust was irrevocable, most often you won’t be able to change it, but if it was a revocable trust, just like any other asset, it will need to be divided.
Is a Will Still Valid After Divorce?
In California and in most states, if you set up a will while you were married, any gifts designated to go to your former spouse would be revoked automatically upon a divorce, unless otherwise explicitly stated.
Arizona actually takes divorce even further and will also automatically revoke gifts made to a former spouse’s family members. Thus, if you intend to leave gifts to a former spouse or his or her family, you definitely want to create a new will entirely. With the signature date being after the divorce is finalized, the distribution of assets should be a non-issue.
Evolution Tax and Legal Can Help With Estate Planning After Divorce
Divorce is difficult and can be complicated, therefore, it is especially important that you consult an estate planning attorney in Orange County before taking any actions over your assets. Estate planning after divorce is an important step and should be done as soon as possible. If you are going through a divorce or are recently divorced, contact Evolution Tax & Legal for a free consultation to see how we can tailor to your needs and best serve you.