“I’m getting divorced. What happens to my estate plan?”
Someone asked me that question just recently, so I wanted to take this opportunity to highlight a few items to consider:
1. Revocation of Existing Joint Trust
You may need to revoke your existing joint Trust with your soon-to-be or now ex-spouse. Some family law attorneys include this as part of a standard dissolution process; some do not. If you don’t revoke the existing joint Trust or significantly amend it to exclude your ex-spouse, he or she may be able to receive and/or manage your assets upon your death.
2. Establish a New Trust
Once you have revoked the old Trust, you should establish a new revocable Trust for the management and distribution of your now-separate estate. This is especially important if you have minor children and you want to make sure that someone other than your ex-spouse has control over the monies held in trust for the children. Make sure that your estate planning attorney has a copy of your divorce agreement, as he or she will need to include any obligations you have to your ex-spouse upon your death.
3. Update Your Will, including Guardian Nominations
You also need to update your Last Will and Testament to remove your ex-spouse as executor and make sure that any assets “pour over” into the new Trust. If you have minor children, you may choose to name your ex-spouse as the guardian, or you may name someone else. However, be aware that your ex-spouse will most likely serve as guardian of your minor children upon your death unless he or she is determined by the court to be unfit. In any case, it is always a good idea to nominate an alternate in case your ex-spouse predeceases you.
4. Update your Financial Power of Attorney
If you had an existing Power of Attorney for Asset Management naming your ex-spouse as primary agent, you should revoke it and execute a new Power of Attorney naming a friend, relative, or other trusted advisor to act as your agent regarding your finances and assets. Often this will be the same person that you name as successor trustee of your Trust and as executor of your Will.
5. Update your Health Care Power of Attorney
The Advance Health Care Directive, or Power of Attorney for Health Care, allows you to name someone to make health care decisions for you if you had a medical or other emergency and were unable to communicate your wishes. Again, you should revoke your existing document to remove your ex-spouse as agent, and you may want to name an adult child, a friend, or another relative.
6. Check Your Beneficiary Designations
There are many assets that pass outside of a trust instrument, such as retirement plan benefits and life insurance proceeds. Review your obligations to maintain certain benefits for your ex-spouse, consistent with the divorce agreement, but then make sure to replace your ex-spouse with another primary beneficiary for those assets to which your ex-spouse has no right. I know of situations where beneficiary designations were never updated prior to death, resulting in unfortunate consequences and litigation to change/correct the beneficiary, which is not always possible.
If you have questions or are interested in discussing the revocation of a joint estate plan or establishing a new estate plan, please contact us.
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