Between all the emotional upheavals of divorce and all the difficult decisions to make, there is also the matter of estate planning. Everyone hopes they are planning for life when they get married to someone, but this reality does not hold true for many.
You may have created an estate plan and stuffed it in a filing cabinet, but now is the time to dig it out and take care of it. So, what happens to your estate plan when you get divorced? Read on to learn about the repercussions and ramifications to consider.
Prior Directives and Powers of Attorney
First off, figure out what documents you signed at the time of estate planning. If you went the usual route, you will have named:
- A durable power of attorney—naming a person who will take over all your financial and legal affairs in case you die or become incapacitated
- A power of attorney for healthcare—someone who can make medical decisions on your behalf in case of death and incapacitation
- A living will or ‘advance directive’—a document that informs people about your wishes. For instance, if you were in a vegetative state and couldn’t communicate on your own.
If your ex-spouse or someone from their family has been named in one of these, you will want to get in touch with an estate planning lawyer and pick someone else. This can be done before the divorce has been finalized; you should if the situation is less than amicable.
What Happens to the Will?
You may have named your ex or their family in your will. If you don’t get your will corrected, your ex-spouse or ex-in-laws can easily file a claim in court. If you created the will when you were married, the state might automatically ignore your spouse’s right to your assets. However, your in-laws, if named, can win their claim.
You will also name an executor or administrator in your will. This is the person who will be in charge of the paperwork and the division of your assets. If you named your ex in one of these roles in your will, the law might allow them to make important decisions about you even if you haven’t been on good terms for a long time.
Trusts for Children or Joint Trusts
Revisit all trusts you have set up for yourself and your family considering them in light of the divorce. If you have set up a joint trust with your now ex-spouse, you may want to change the documentation. You could have named them a trustee to oversee assets in a trust in the chance that you pass away. In such a case, your estate planning attorney will advise you on the best way to modify trust documents.
Life Insurance, Retirement, et al
There are some assets that are not considered part of the ‘estate’ passed on by a will. If you haven’t placed your life insurance or retirement policy in a trust and assigned a beneficiary, there are chances that your ex will end up owning them. Here are some other assets that need special attention:
- Pensions, IRAs
- “Transfer on death” investment accounts
- Bank accounts that have a “payable on death” clause
At the time of divorce, get in touch with the companies and institutions that run your policies and accounts. Don’t assume something will be transferred in your name just because there is an understanding with your ex-spouse; get the paperwork done.
What Can I Do To Safeguard Myself?
To protect yourself against possible fraud or a potential runaway case, go through this list of things to do when the divorce has been finalized
Change Power Of Attorney and Health Proxy
Get in touch with your estate planning lawyer and ask them to change your power of attorney and health proxy as soon as possible. If your ex-spouse has a durable power of attorney when you die or become incapacitated, it would mean that they can take all sorts of decisions on your behalf. For instance, gain access to accounts that are solely in your name.
Update Your Will
The second line of defense is updating your will. You will have to get the old one revoked and another one remade. This time, remove your spouse as an administrator or executor. You will probably not be able to stop your ex-partner from becoming a guardian to your children, but you can bring in an additional guardian’s name if you like.
Discover Your Options
You will likely have to wait for the divorce to be finalized to change some official documents; for example, the beneficiary of a life insurance policy or of your pension. When you file for divorce, you lose control of your assets for a little while until the details are determined. Once that is done, you’re free to alter or revise your estate plan.
Consider the Pre/Postnuptial Agreement
In case you have a pre or post-nuptial agreement, you will have to give up a part of your estate to your ex-spouse as per its terms. Your attorney can advise you on the best way to go about the legal proceedings of asset division.
A divorce can be an emotional upheaval, but if you keep a clear head, you can get the important things out of the way first. After all, these decisions can affect you for life. Good luck!