Divorces are stressful and emotionally fraught. During the early days of the divorce process, with contentious issues in negotiation, custody questions, and a hearing looming ahead, your estate plan may be far from your mind. However, a diligent divorce attorney often reminds their divorce-case clients of the importance of promptly addressing allowable changes to an estate plan during the divorce process. Chances are, your existing plan was one you created with your spouse during happier times. Your priorities and allegiances have changed if your marriage journey ends in divorce, and your estate plan should reflect that change. Failing to change your estate plan could mean the terms of the existing plan take effect if you die or become incapacitated during the process of your divorce.
When it’s time to make key changes in an estate plan during a divorce, there are 5 important things to consider.
1. Change Your Healthcare Proxy and Power of Attorney
If a sudden illness or accident incapacitates you during your divorce, the last thing you’d want is your contentious spouse making critical decisions about your health and legal matters when you aren’t able to make them yourself. You’ll also need to revoke the power of attorney if you’ve allotted this duty to your spouse. Giving a spouse power of attorney means they’ll have access to all of your legal and financial information.
Making these two changes to your estate plan as soon as possible is critical. Your healthcare proxy and power of attorney should go to someone you’d trust to voice your own wishes when you are unable to do so.
2. Update your Existing Will
Like your healthcare proxy and power of attorney, if you drafted your last will and testament during happier times in your marriage, you may wish to make significant alterations to your bequests. Ask your attorney about the laws in your state regarding disinheriting a spouse. Some states have laws preventing estate holders from disinheriting an ex-spouse completely due to the premise that a spouse contributed to the building of the estate. You may need to leave a specific percentage of the estate to your ex-spouse, or the law may prohibit you from making changes until after the final judgment.
If you’ve named your spouse as executor, that’s something important to change since you very likely don’t wish for a contentious spouse to have authority over your estate should you pass. You may also wish to name an alternate guardian for your children should your ex-spouse die, but you cannot prevent an ex-spouse from becoming the children’s sole guardian unless the court has found them unfit.
3. Update Your Life Insurance Policies
If you have life insurance policies, Pay on Death accounts (TODs), and retirement accounts with your spouse named as beneficiary, you should make changes to those accounts after the final judgment. While each state handles this differently, in most states, a divorce invalidates a spouse as a beneficiary. Typically, the amount would go to whomever you listed as a secondary beneficiary.
4. Determine the Status of a Trust
Handling a trust during a divorce can be complex. It’s important to discuss this with your attorney. Making changes to a trust during the divorce process could trigger contempt of court charges for attempting to transmute marital property into separate property.
If your trust is an irrevocable trust, it will remain in place regardless of the divorce. If you inherited a trust, speak to your attorney about whether or not it remains your separate property or if commingling of the asset occurred during your marriage.
5. Consult With Your Attorney Before Making Changes to Your Estate Plan
It’s important to speak with an attorney before finalizing any proposed changes to your estate plan during the divorce process. While some changes are important to make during the divorce process, others should wait until after your divorce. The state could consider some changes as an attempt to conceal assets or convert marital assets into separate ones. Until the final judgment in your hearing, the state upholds your fiduciary responsibility to your spouse.
A Newport Beach divorce attorney can advise you on the best way to proceed before and after your divorce is complete.
