A well-conceived estate plan will help you prepare for the expected and the unexpected. A will, for example, declares how your property will be distributed after your inevitable death, while a power of attorney designates a trusted person to manage your personal and business affairs in the event that you become incapacitated without warning. But how does a divorce impact an estate plan? The best way to protect your interests in this situation is to consult an experienced estate planning attorney.
Updating Your Estate Planning Documents
Planning an estate is not a once and done affair, and we recommend that clients review their estate plans on a regular basis, about every 2-3 years, to ensure that it is up to date. It is also crucial to revise your estate plan with major life changes, such as divorce. While some estate planning documents cannot be modified until the divorce case is settled, you should plan on protecting your assets and the rights of any children from the marriage as the divorce proceeds.
While going through a marital breakup is a difficult family transition, organizing your financial affairs at this time will better prepare you for your new lifestyle. The first estate planning documents to reconsider are durable powers of attorney and advance directives for healthcare (healthcare proxy). These documents should be revised by naming new agents to manage your personal affairs and coordinate your medical care if you become incapacitated. While the appointment of a spouse as a healthcare agent is automatically revoked by law after a divorce, a new advance directive should be established much sooner.
Once the divorce is settled, don’t delay—revise your will and any trusts that may have been created. If your ex was named as your executor or successor trustee, he or she should be replaced, whether by a sibling, parent, or a trustworthy associate. In addition, the beneficiary designations in these documents should also be aligned with your revised estate plan.
On that note, you should also update the beneficiary designations of retirement plans, life insurance policies and other financial accounts. It is worth noting that the assets in a retirement plan, such as an IRA or 401(k), are considered marital property that are subject to division in a divorce.
While going through a divorce is an overwhelming experience, it is essential to protect your interests. Revising these estate planning tools will help to ensure that your assets are protected and that your children and heirs receive the inheritance you intended for them. In some cases, a divorce agreement may actually stipulate that a testamentary trust be established in a will to protect the inheritance rights of minor children. By working with an experienced estate planning attorney, you can implement a post-divorce estate plan that will protect your assets, your family, and your future.