The importance of examining your estate plan after divorce
The time before, during, and after a divorce is chaotic. There is so much upheaval with residence changes, court appearances, orders being issued and custody arrangements being made that many people forget about one key issue: the fact that their preexisting estate plan most likely names their soon-to-be-ex spouse as primary heir, beneficiary, fiduciary and healthcare proxy. If changes are not made to important estate-related documents like wills, trusts, insurance policies, powers of attorney and health care directives, your money, your legacy and even your life could one day be in your former spouse’s hands.
Considerations before divorce
If you haven’t already undertaken estate planning measures like creating a will, setting up a trust or naming a power of attorney, and you are contemplating divorce, acting quickly (before a divorce action is filed) could ensure that the proper parties – often your children, siblings or other loved ones – will inherit your property instead of your ex. Those who already have a comprehensive estate plan prior to divorce should seek legal advice before making any dramatic changes. Even if your intent is innocent enough, wanting to ensure that your property goes directly to your children, disinheriting your spouse at this time might give the impression that you are attempting to hide assets, acting in bad faith towards your spouse or otherwise perpetuating some sort of fraud on the court.
During the divorce
Once a divorce action has begun, changes shouldn’t be made to wills, trusts, insurance policies or financial accounts without legal advice to avoid conflicting with relevant family laws and court dictates. Some spouses find it necessary to have orders entered legally prohibiting each other from making substantive estate plan modifications until the divorce is complete. With court approval, though, it is usually acceptable to assign new trustees, fiduciaries and healthcare decision-makers prior to the divorce being finalized.
After the dust settles
Once the proverbial divorce dust settles, it is much easier to make wholesale estate plan changes, but there are still nuances that parties need to be considered. For example, if pension or retirement fund benefits were part of the couple’s divorce decree, it may be illegal to make post-divorce changes and name new beneficiaries on retirement accounts and insurance policies without court approval. It might be a good idea to put money for your children’s education or inheritance into a trust with someone other than your former spouse as the trustee to ensure that the money serves its goal.
No matter what kind of estate plan you have, how much money you make or how many assets you own, divorce will have an impact on the legacy you leave. The importance of reexamining estate planning documents around the time of a divorce cannot be stressed enough. A team approach – with both a family law attorney and an estate planning professional – looking at the impact of your divorce is an effective way to ensure that your final wishes are followed in a manner that doesn’t conflict with the dictates of your divorce and doesn’t violate local, state or federal laws.