Q. My husband and I completed our estate planning documents ten years ago. Now that we are both ready for retirement, we have decided to go our separate ways. We have been separated for a while now, and divorce is imminent. What happens to the estate planning documents we completed together? Thanks for your help!
A. I’m sorry to hear about your situation. Divorce is never easy. It is often a difficult time emotionally, and also a time where there are lots of decisions to make and actions to take.
As you are likely realizing, divorce affects a lot more than just a couple’s relationship status. One major area affected by divorce is the couple’s estate planning, including wills, trusts, and other estate planning tools. So, as you are undergoing your divorce, an important task should involve addressing your estate planning.
Estate Planning Changes for Divorce
It’s recommended that you update your estate plan after any major life event, including separation in advance of divorce, because it’s likely that your choices for beneficiaries and agents will have changed. For example, you probably have your spouse named as your primary beneficiary and primary decision-maker on all of your current documents, which you probably want to change immediately. You’ll likely want to rethink some of those decisions in light of the change in marital status. These are some changes you should consider making:
• Update your Advance Medical Directive. If you are in a car accident and end up in the ICU, who will make health care decisions for you? Chances are your Advance Medical Directive names your spouse as the decision maker, which may not be what you want when you are separated and planning to divorce, so now is a good time to make updates! In addition, please note that the older an Advance Medical Directive is, the less likely it is that it will be honored by a doctor or hospital, so updates are recommended every 3-5 years regardless of marital status.
• Change your General Power of Attorney. Your General Financial Power of Attorney probably names your spouse in first position and gives your spouse access to all of your accounts and assets. This should concern you, particularly if the separation and impending divorce is not amicable. You may need to revoke that power of attorney, execute a new one, and possibly provide notice to your spouse of the revocation. This is typically done through an experienced estate planning attorney. Even if no changes are necessary, you should annually sign updated Powers of Attorney. Some financial institutions won’t accept a Power of Attorney more than a year old.
• Update your living trust. Now that you’re getting divorced, it’s likely that your living trust and will needs to be reevaluated and updated. Divorces usually mean a change in assets, and your estate plan needs to reflect those changes. One key issue is what assets to leave your spouse. If there are gifts for his or her family, you may want to remove those. A large issue to consider is trust provisions for young children. Do you want your spouse managing trust funds you may leave for your children?
• Decide what to leave your spouse. Often clients will leave the spouse only what he or she is entitled to receive under the laws of your state. Others take a more aggressive approach and disinherit him or her knowing that he or she could contest if there’s a death prior to divorce.
• Have minor children? Revisit your guardianship plan. You didn’t mention whether or not you have minor children. If so, and if you and your spouse already created a guardianship plan before you divorced, it may be time to revisit this plan. The nominated guardians may be one of your spouse’s family members — a choice you may no longer be comfortable with. It’s important to revisit your plan and choose someone you can trust. Confer with your spouse if you have joint custody.
• Follow your Separation and Property Settlement Agreement. When revising your estate planning, you need to provide your estate planning attorney with a copy of your property settlement and separation agreement to determine what, if anything, your spouse is entitled to in the event of your death. Your new estate plan should be consistent with the terms of your agreement.
• Plan for All Assets. You may be entitled to a portion of your former spouse’s retirement accounts, such as a 401(k), IRA or other eligible plans. Many divorcing men and women are unaware of just how many assets existed in their marriage and what they may be entitled to. Once you’ve claimed your fair share, it’s important to know that you can designate beneficiaries (such as your children) for these plans, which is an essential part of your estate plan.
Take the Step to Revisit Your Estate Plan Today
The biggest estate-planning mistake someone can make besides not having a plan at all, is to not update their plan upon major life changes. The only way to ensure that your estate plan truly reflects who you are, what you care about, and what you have today is to have your documents reviewed and updated frequently.
Estate planning may be the last thing on your mind right after a separation, but it’s more important than ever to make it a priority.
Estate Planning is Important for Everyone
In addition to basic estate planning, we have more advanced strategies available to help people at all ages and stages in their lives to plan for themselves and for their loved ones. By planning in advance, each person can retain the assets it has taken a lifetime to accumulate and the peace of mind that their family’s needs will be adequately and properly addressed. If you or members of your family have not done Incapacity Planning, Estate Planning, or Long-term Care Planning, or if a loved one is beginning to need more care than you can handle, please contact us as soon as possible to make an appointment for an initial consultation:
Estate Planning Fairfax: 703-691-1888
Estate Planning Fredericksburg: 540-479-1435
Estate Planning Rockville: 301-519-8041
Estate Planning DC: 202-587-2797