How to Change an Estate Plan After a Divorce

Going through a divorce is painful at every step and in every way – emotionally, physically, mentally, and financially. 

Unfortunately, yet another step that is important for couples not to overlook during this challenging time is updating the estate plan that was in place when they were happily married. If they do, assets upon death could be dispersed to an ex-spouse, which is not a happy thought. Even worse, if that ex-spouse remarries, assets could be given to that new spouse and their children.

Here are a few options to ensure that does not happen to a divorced couple’s will, living trust, power of attorney documents, and beneficiary requests to ensure a new chapter in life can begin, and loved ones are protected. 

Make a New Will After a Divorce

It is important to first tear up the old will and start from scratch with a new one immediately after the divorce is finalized. And, if there is not a will in place at the time of divorce, it is a great time to make one with a family law attorney. 

A will is designed to leave property to those designated, name an executor, and nominate a guardian to take care of young children if necessary. 

• Leaving Property: Most states will automatically dissolve or revoke any gifts made to a spouse post-divorce. California, in fact, does adhere to this legislative layer of protection, but not every state follows this law – plus, laws can change and be tricky; for instance, whether or not an alternate beneficiary was named within the will. Also, keep in mind that the rest of the will does not fall under this legal protection plan, and this law does not go into effect until the divorce is finalized, not during the process. 
• Naming an Executor: Because an ex-spouse isn’t the first choice to be in charge of an estate after death, it is best to write up a fresh new will to appoint a new one and an alternate. 
• Naming a Guardian: Having a will is imperative to appoint a trusted guardian to raise children under 18. If the ex-spouse is no longer trusted, a new will can express an alternate guardian of choice to have custody through a letter listing the reasons. A judge may take it under consideration. 

Update Beneficiaries After a Divorce

Naming beneficiaries in a will is vital to cover valuable assets after death. And it is even more important to change them if those beneficiaries need to be revised after a divorce is finalized for any:

• Life insurance policies
• Retirement accounts (IRAs and 401Ks)
• Pay-on-death bank accounts
• Transfer-on-death brokerage accounts
• Possible real estate or motor vehicle ownership. 

To make the change, request new documents from the bank, brokerage, or an employer to revise the will as soon as possible. This is because the ERISA (Employee Retirement Income Security Act) is a federal law that mandates that a plan administrator must turn funds over to the beneficiary named in any estate plan documents – no matter the state law. This means if that former spouse is still named as the beneficiary, he or she will inherit the assets unless the paperwork is properly revised.

Make New Powers of Attorney After a Divorce

What is a power of attorney? This is a document – and a major part of an estate plan – that gives someone authority to act for the spouse who cannot physically do so at the time. Usually, there are two powers of attorney for:

1. Health care, or any medical treatment decisions that need to be made while the other spouse is indisposed. Sometimes the health care power of attorney is also called an advance directive, designation of patient advocate, or health care surrogate. 
2. Financial, or involving any financial matters, such as selling property or removing funds from bank accounts. 

In short, if an ex-spouse is still appointed as a power of attorney in an estate plan that gives him or her the authority to make decisions for the family, immediately revoke those documents, deliver copies to all financial institutions active in the plan, as well as health care providers, and make new documents that will entrust all to another person. This can be done while the divorce is still pending.

Make a New Living Trust After a Divorce

Just like a will, a living trust should also be revised after a divorce. Even minor children can act as beneficiaries of the new living trust to prevent an ex-spouse from controlling various assets that will benefit them, including:

• Pay-on-death bank accounts
• Transfer-on-death brokerage accounts
• Life insurance policies
• IRAs, 401ks, 403bs, and pensions, which all need to be written in a certain language to avoid tax ramifications
• The family home to safeguard the property, for the youngest child until the age of an adult, from creditors or a future spouse

Other Things in an Estate Plan to Consider After a Divorce

It is critical to stay vigilant and to leave no stone unturned when considering all elements involved in the estate plan when going through a divorce. Additional considerations that should be under review during this time include:

• Reviewing any prenuptial or postnuptial agreements, which is especially essential if there are plans to remarry down the road. 
• Having parents review any estate plans that may have each spouse or grandchildren listed as beneficiaries. 
• Reviewing property (real estate, motor vehicles, boats, RVs, and more) tied to a title document to reflect the appropriate owner post-divorce.
• On the occasion that the divorced couple remains friends, reviewing any portion of the will where it is preferred that a gift is given to an ex-spouse.
• Reviewing and better understanding your life insurance policy.

Get Legal Guidance on Changing an Estate Plan After Divorce

There are so many intricate details to comb through in the wake of a divorce. Lean on an attorney experienced in resolving the most challenging family law issues, such as changing an estate plan. Steven Bishop has more than four decades of experience and is here to offer personalized guidance and a legal understanding of each case he represents. Contact him today.