You have recently divorced your spouse and the judge has signed the divorce decree. Now what? You likely are sick of paying attorneys’ fees. But there is one last attorney you need to talk to: an estate planning attorney. Did you and your spouse have any estate planning done together? If so, you very likely need to change that. If not…now is the perfect time to get your estate plan in order.
When you meet with an estate planning attorney, be sure to bring your divorce decree.
What is covered by your divorce decree
1. Support obligations
Spousal or child support obligations are very likely covered by your decree. These obligations may require purchasing life insurance to fulfill your obligation upon death. If there is a child support obligation, it may be wise to have the life insurance policy owned by a trust. This is so distributions to the minor children are made by a trustee instead of a lump sum paid to your former spouse. (If this is not incorporated into your decree, make sure your former spouse agrees to this strategy!)
2. Property Division
The divorce decree will also cover the division of your marital property. This is helpful information to an estate planning attorney so that they have an accurate picture of your property, assets, and accounts.
In addition to identifying the accounts or property you now own, how you own them is incredibly important. Ownership of accounts/property previously owned by you and your ex jointly has probably changed to tenants in common under state law. This is important because before your divorce, if you had passed away, your former spouse would have likely received your interest in the account/property automatically. However, now that the ownership has changed to tenants in common, when you pass away, your interest will go to your heirs.
If you don’t do any planning, the interest will be transferred according to state law, which may not coincide with what you want. Estate planning can remedy this problem.
What Effect Does the Divorce Decree Have on an Existing Estate Plan?
Last Will and Testament
Depending upon your home state, divorce can have a varying impact on your will. In some states, a divorce revokes all will provisions that benefit your former spouse. Additionally, some state laws also revoke the appointment of your former spouse as the personal representative. However, in the District of Columbia, a divorce revokes the entire will.
Should you die before executing a new will, the law will determine who receives your money and property. Even if the gifts to your former spouse are revoked, the law may not revoke gifts you made to your former spouse’s family. This fact alone makes it very important to revise your documents as soon as possible.
Revocable Living Trust
Similar to wills, the laws regarding what happens to a provision in a revocable living trust vary. Some state laws revoke all provisions relating to your ex, while others leave the trust intact. Did you and your former spouse have a joint trust? If so, it is important to review it and make any desired changes. For example, gifts to your former spouse’s family under a trust may remain intact.
Financial Power of Attorney
In some states, filing for divorce revokes the former spouse’s appointment as agent (the person who would act on your behalf) under a financial power of attorney. However, in Illinois, a divorce does not revoke your spouse’s ability to act as your agent. Regardless, if there are any outstanding powers of attorney, it is important for you to inform those people of your divorce. It is also important to provide them with notice that your ex is no longer authorized to act on your behalf.
Medical Power of Attorney
Like other estate planning documents, state laws vary as to whether or not your ex can make medical decisions for you in an emergency. Some states will revoke the designation of your former spouse as your agent for medical matters as a result of the divorce, while others do not. Regardless, it is incredibly important to keep this document up to date. It is also important to provide it to the necessary healthcare professionals.
Because a life insurance policy is a contract with a third party, a divorce can sometimes complicate things. Did you name your spouse as a beneficiary before your divorce? State law varies as to whether that designation will automatically be revoked. And even if the designation is revoked under state law, it is important to change the designation for notice reasons. In some cases, although the former spouse is no longer entitled to life insurance proceeds, they may still be paid the proceeds if the right people were not informed. It will then be the responsibility of the rightful beneficiary to sue and collect the proceeds from your ex. Hopefully, this is not an issue for you. But if it is, it could create a lot of avoidable drama.
For accounts governed by the Employee Retirement Income Security Act of 1974 (ERISA), the designation is not automatically revoked. You want to ensure that your former spouse does not receive the benefits. Accordingly, you should affirmatively change the designation if your divorce decree does not.
You Need An Estate Plan Now More Than Ever
Estate planning after your divorce is crucial. As a newly single person, you are now in full control of your money and property. Without an estate plan in place, the state laws will determine what happens to your hard earned money and property.
Ciick HERE to contact us today so we can schedule a free consultation to protect your new future and those you love, and don’t forget to bring the divorce decree.