If you’ve just come through a divorce, it’s likely that the last thing you want is to talk to another lawyer. But divorce is a major life change that affects both your assets and the configuration of your family. Accordingly, estate planning after divorce needs to be a priority.
In some jurisdictions, like Virginia, a divorce will automatically revoke a bequest to a spouse in a will; in others, including the District of Columbia, a divorce revokes the will altogether, necessitating the drafting of a new will. Maryland law revokes all provisions of a will that relate to a former spouse, unless the divorce decree provides otherwise.
Remember, too, that a will is not the only document in an estate plan. A comprehensive estate plan also includes powers of attorney, advance health care directives, and may include trusts, life insurance, and beneficiary designations on retirement and investment accounts. Even in those jurisdictions in which divorce does limit an ex-spouse’s rights, it is advisable to update all components of your estate plan after divorce to prevent conflict and confusion.
The prospect of estate planning after divorce can be daunting. It helps to have a checklist of items to address. Be sure to bring your divorce decree to your estate planning attorney’s office so that he or she can ensure that your estate plan complies with the terms of your divorce.
A will, also known as a “last will and testament,” is the basic building block of an estate plan. It identifies, among other things, who you want to serve as executor (personal representative) of your estate, who should serve as your child’s guardian if a parent is not available, and how your property should be distributed after your death.
During your marriage, your will may have left all of your assets to your spouse, and likely named your spouse as personal representative of your estate. After your divorce, you should prepare a new will that names a new personal representative and distributes your assets according to your current wishes. If you still want your ex-spouse to inherit from you, creating a new will dated after your divorce will remove any ambiguity and allow them to do so.
If you want to leave your assets to your children who may still be minors at your death, you should also name an adult to manage their inheritance for them until they become legal adults. (However, since they will be entitled to their full inheritance when they turn 18, you may want to consider creating a trust to protect those assets until they become more mature.)
If you predecease your children’s other parent, the other parent will almost always get custody of the children. However, you should still name a guardian in your will in case the other parent is not available or capable of caring for your children in the event of your death.
A revocable living trust is a common component of many estate plans. A living trust allows you to use, enjoy, and manage trust assets during your life. Upon your death or incapacity, a successor trustee whom you have named takes over managing the trust for the benefit of your named beneficiaries.
If you and your spouse have a joint trust, you should divide it in your divorce. After divorce, you should create a new trust that reflects your current assets and which names a successor trustee and beneficiaries other than your ex-spouse. If your children are your beneficiaries, naming a new successor trustee will prevent your ex-spouse from having access to their assets.
A durable financial power of attorney allows someone you designate (your agent) to make financial decisions and transactions for you if you cannot manage your own affairs. In Maryland and Virginia, filing for divorce automatically revokes your spouse’s authority to act as your agent, but this is not the case in the District of Columbia. To prevent an estranged spouse from attempting to exercise an agent’s authority in any jurisdiction, it is best to revoke prior powers of attorney by executing new ones and notifying your financial institutions.
Advance healthcare directives allow an agent of your choosing to make medical decisions for you when you cannot make those decisions for yourself; depending on the type of advance directive, it may also specify your wishes for end-of-life care.
In some jurisdictions, including Maryland and Virginia, divorce does not automatically revoke the authority of an agent under an advance healthcare directive. Unless you want your ex-spouse to have the literal power of life and death over you if you become incapacitated, execute new advance directive, and make sure your care providers have a copy in your chart.
These accounts do not require a visit to your estate planning attorney to update. You simply need to contact your insurance agent or account administrator to make a new beneficiary designation. However, it is critically important that you do so as soon as possible. These are valuable assets, often worth hundreds of thousands of dollars or even more. Depending on your jurisdiction and the specific type of asset, divorce may not automatically revoke a beneficiary designation in favor of your ex-spouse.
If you fail to update your beneficiary designations after divorce, your ex-spouse could receive a huge windfall and laugh all the way to the bank. Meanwhile, the people you wanted to inherit your assets would be left empty-handed.
One cautionary note about life insurance: either you by agreement, or possibly the court in your divorce, could order one spouse to maintain some coverage with the other spouse listed as a beneficiary. This is done to secure a future child support or alimony obligation in the event of the obligor’s death.
If you are the obligor who must maintain life insurance, you will want to be aware of how long the policy must be kept in force and terminate it (or change the beneficiary) as soon as you are permitted to. If you are the ex-spouse who is the beneficiary of such life insurance, you may want your separation agreement and/or divorce decree to provide that the insured will provide you with regular proof that they are making premium payments on the policy.
To learn more about estate planning after divorce, contact Strickler, Platnick & Hatfield to schedule a consultation.