Divorce and Your Estate Plan: What You Need to Know
Divorce is a life-altering event that affects nearly every aspect of your financial and legal affairs, including your estate plan. If you and your spouse created a joint estate plan while married, a divorce can significantly impact its terms. Whether you are contemplating divorce or already in the process, understanding how it affects your estate planning is crucial to protecting your assets and ensuring your wishes are honored.
How Divorce Impacts a Joint Estate Plan
When couples create an estate plan together, they often name each other as primary beneficiaries, trustees, executors, and agents under powers of attorney. However, once a divorce is finalized, many of these designations may no longer reflect your intentions. Here’s what you need to consider:
Revocation of Beneficiary Designations – In many states, including California, a divorce automatically revokes a former spouse as a beneficiary in a will or trust unless explicitly stated otherwise. However, life insurance policies, retirement accounts, and payable-on-death bank accounts may not automatically update, meaning your ex-spouse could still inherit assets unless you change the designations.
Trusts and Divorce Considerations – If you and your spouse created a revocable living trust, the trust terms may need to be amended or revoked altogether. If your trust was a joint trust, you will likely need to establish a new, separate trust reflecting your new financial and family circumstances.
Wills and Powers of Attorney – A divorce typically nullifies provisions in a will that benefit a former spouse, but this does not apply to other fiduciary appointments. If your ex-spouse is still named as your healthcare agent or financial power of attorney, they may retain decision-making authority unless you update these documents.
Guardianship for Minor Children – If you have young children, divorce does not automatically change guardianship provisions in your estate plan. If you were previously comfortable with your ex-spouse raising the children in the event of your death, this may remain unchanged. However, if there are concerns about your ex’s ability to care for your children, discussing alternative guardianship arrangements with an attorney is critical.
Estate Planning Considerations for Those Planning a Divorce
If you are planning on filing for divorce soon, take these proactive steps to protect your estate:
Revise Your Will and Trust – You may wish to amend or revoke certain provisions before filing for divorce, as California law may limit your ability to make changes once divorce proceedings begin.
Update Beneficiary Designations – While you may not be able to remove your spouse from all accounts immediately due to legal restrictions, you can review designations and adjust where possible.
Modify Powers of Attorney – You may not want your soon-to-be ex-spouse to have control over your healthcare or financial matters should something happen to you before the divorce is finalized.
Protect Separate Property – If you have inherited assets or owned property before marriage, ensuring they remain separate from marital assets during the divorce process is essential.
Final Thoughts
Divorce is a major transition that necessitates a careful review of your estate plan. Waiting too long to update your documents could result in unintended consequences, such as an ex-spouse inheriting your assets or making medical decisions on your behalf. By working with an experienced estate planning attorney, you can ensure your plan aligns with your new life circumstances and protects your interests moving forward.