In the first part of this series, we discussed a couple of the most critical updates you must make to your estate plan if you’re getting divorced. Here, we’ll cover the last three of these must-do planning tasks.
Because getting divorced can be overwhelming on so many different levels, updating your estate plan often takes a back seat to other seemingly more-pressing priorities. But failing to update your plan when you are getting divorced can have potentially tragic consequences, some of which you may have never even considered before.
In fact, it’s critical that you update your plan not only after the divorce is final, but as soon as you know the split is inevitable. Until your divorce is final, your marriage is legally in full effect, so if you die or become incapacitated while the divorce is still ongoing and you haven’t updated your plan, your soon-to-be ex-spouse could end up with complete control over your life and assets.
For example, if you suddenly die of a heart attack while the divorce is ongoing and never got around to changing your estate plan, it’s quite likely that your future ex would inherit everything. And if that’s not bad enough, if you were to become incapacitated in a car accident during the divorce, the very person you’re paying big money to legally remove from your life could be granted complete authority over all of your legal, financial, and healthcare decisions.
This is something your divorce attorney may not think to bring up, but it’s literally one of the most critical matters you need to handle if you’re ending your marriage.
Last week, we discussed the first two estate planning changes you must make—updating your power of attorney documents and beneficiary designations—and today we’ll share the remaining three.
3. Create a new will
You should create a new will as soon as you decide to get divorced. Rethink how you want your assets divided upon your death. This most likely means naming new beneficiaries for any assets that you previously left to your future ex and his or her family. And unless it’s your wish, you’ll probably no longer want your ex—or any of his or her family—listed as your will’s executor or administrator, either.
And should you choose not to create a new will during the divorce process, don’t assume that your old will is automatically revoked once the divorce is final. State laws vary widely in regards to how divorce affects a will. In some states like North Carolina, the terms of your will with respect to your ex-spouse is revoked by default upon divorce. While in others, unless it’s officially revoked, your entire will—including all provisions benefiting your ex—remains valid even after the divorce is final.
In light of this uncertain legal landscape, it’s critical that you consult with us as soon as you know divorce is on the horizon. We can help you understand the law and how to best navigate it when creating your new will—whether you do so before or after your divorce is over.
4. Create New Trusts
If you have a revocable trust set up, you’ll want to review and update it, too. Like wills, the laws governing if, when, and how you can alter a trust during a divorce can vary, so you should do it as soon as legally possible. In addition to reconsidering what assets your ex spouse should receive through the trust, you’ll probably want to replace him or her as a successor trustee if they are so designated.
If you have a joint trust with your spouse, you both will need to create new Trusts and revoke the existing joint trust.
And if you don’t have a trust in place, you should seriously consider creating one, especially if you have minor children. Trusts provide a wide range of powers and benefits unavailable through a will, and they’re particularly well-suited for blended families. Given the likelihood that both you and your spouse will eventually get remarried—and perhaps have more children—trusts are an invaluable way to protect and manage the assets you want your children to inherit.
By using a trust, for example, should you die or become incapacitated while your kids are minors, you can name someone of your choosing to serve as successor trustee to manage their money until they reach adulthood, making it impossible for your ex to meddle with their inheritance.
Beyond this key benefit, trusts afford you several other levels of enhanced protection and control not possible with a will. So you should at least discuss creating a trust with an experienced lawyer like us before ruling out the option entirely.
5. Revisit your plan once your divorce is final
During the divorce process, your main planning concern is limiting your soon-to-be ex’s control over your life and assets should you die or become incapacitated before divorce is final. The individuals to whom you grant power of attorney, name as trustee, designate to receive your 401k, or add to your estate plan in any other way while the divorce is ongoing are often just temporary.
Once the divorce is final and your marital property has been divided up, you should revisit all of your estate planning documents. You should update them based on your new asset profile and living situation. Your plan should continuously evolve along with your life circumstances, particularly following major life events.
What’s a major life event? Events such as getting remarried, having additional children or grandchildren, a family member’s death, a recent inheritance, or a move to a new State, to name just a few.
Don’t wait; act now!
Even though getting divorced can be one of life’s most difficult transitions, it’s vital that you don’t wait to make the time to update your estate plan during this trying time. Act now and meet with us as your Personal Family Lawyer® to review your plan immediately upon realizing that divorce is unavoidable. Contact us today to get the process underway with a Family Wealth Planning Session.
This article is a service of Susan Hunt, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.