A divorce can be an overwhelming experience that impacts every facet of your life. Your estate plan might not be at the forefront of your mind, but a divorce will affect it. Many people forget to update their plan or put it off until it’s too late.
Failing to update your plan for divorce can have several potentially tragic consequences. In most cases, you can’t rely on your divorce lawyer to bring them up. If you are in the midst of a divorce, and your divorce lawyer has not brought up estate planning, you need to know a few things. Your estate plan needs to be updated, not only after your divorce is final, but as soon as you know a split is inevitable.
Here’s WHY: Until your divorce is final, your marriage is legally in full effect. This means if you die or become incapacitated while your divorce is ongoing and haven’t updated your estate plan, your soon-to-be ex-spouse could end up with complete control over your life and assets. While this isn’t generally a good idea in the divorce context, it’s probably not what you would want either.
With the relationship ending, you probably wouldn’t want your spouse having that much power and control. If so, you must take action. Some state’s laws can limit your ability to make certain changes to your estate plan once your divorce has been filed. Here are a few of the most important updates you should consider making as soon as divorce is on the horizon.
1. Who’s Got The Power? – Power of Attorney
If you were to become incapacitated by illness or injury during your divorce, the same person you are paying big money to legally remove from your life would possibly be granted complete authority over all your legal, financial, and medical decisions. Knowing this, it’s imperative that you update your Power of Attorney documents as soon as you know divorce is coming.
Your estate plan should include both a Durable Financial Power of Attorney (DPOA) and a Health Care Power of Attorney (HCPOA). A DPOA allows you to grant an individual of your choice the legal authority to make financial and legal decisions on your behalf should you become unable to make such decisions for yourself. Similarly, an HCPOA grants someone the legal authority to make your healthcare decisions in the event of your incapacity.
Without such planning documents in place, your spouse has priority to make financial and legal decisions for you. And since most people typically name their spouse as their decision maker in these documents, it’s critical to take action—even before you begin the divorce process—and grant this authority to someone else, especially if things are anything less than amicable between the two of you.
In Florida, the filing of a divorce action will automatically terminate an existing power of attorney. This would be a good thing, right? Well, what happens if you need someone to act on your behalf during the divorce proceeding or shortly thereafter? You might be happy to learn that you don’t have to take action to remove your ex-spouse, but you do need to find a replacement sooner rather than later.
2. Update Your beneficiary designations
As soon as you know you are getting divorced, update beneficiary designations for assets that do not pass through a Will or Trust, such as bank accounts, life insurance policies, and retirement plans. Failing to change your beneficiaries can be a major issue in the future.
For example, if you get remarried following your divorce, but haven’t changed the beneficiary of your 401(k) plan to name your new spouse, the ex you divorced 15 years ago could end up with your retirement account upon your death. And due to restrictions on changing beneficiary designations after a divorce is filed, the timing of your beneficiary change is critical.
In most states, once either spouse files divorce papers with the court, neither party can legally change their beneficiaries without the other’s permission until the divorce is final. With this in mind, if you’re anticipating a divorce, you may want to consider changing your beneficiaries prior to filing divorce papers, and then post-divorce you can always change them again to match whatever is determined in the divorce settlement.
If your divorce is already filed, consult with your divorce lawyer to see if changing beneficiaries is legal in your state—and also whether it’s in your best interest. Finally, if naming new beneficiaries is not an option for you now, once the divorce is finalized it should be your #1 priority. In fact, put it on your to-do list right now!
Once again, Florida takes a different position on this issue. When the court issues the order dissolving the marriage, the existing beneficiary designations are voided. Perfect, you say – well, think again. When a beneficiary designation is deleted, the relevant account or asset will then devise to the default heir. This means if you have minor children with your ex-spouse, that investment account for which your ex-spouse was just removed as a beneficiary because of the divorce will now be “reinstated” as the default guardian of the property for this asset for your minor children. The lesson here is simply to add beneficiary designations to the list of things that need to be accomplished once the divorce is final.
3. New Will, New Way – Create a new Will
Creating a new Will is not something that can wait until after your divorce. In fact, you should create a new Will as soon as you decide to get divorced, because once divorce papers are filed, you may not be able to change your Will. Most married couples name each other as their executor and the beneficiary of their estate, it’s important to name a new person to fill these roles as well.
When creating a new will, rethink how you want your assets divided upon your death. This probably means naming new beneficiaries for any assets that you’d previously left to your future ex. Keep in mind that some states have community property laws that may entitle your surviving spouse to a certain percentage of the marital estate upon your death, no matter what your will dictates. So, if you die before the divorce is final, you probably won’t be able to entirely disinherit your surviving spouse through the new will.
However, it’s almost certain you wouldn’t want him or her to get everything. Accordingly, you should create your new will as soon as possible once divorce is inevitable to ensure the proper individuals inherit the remaining percentage of your estate should you pass away while your divorce is still ongoing.
If you do not 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, your Will is revoked by default upon divorce. 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 Florida, the provisions of your will affecting your spouse will automatically be invalidated when the final order of dissolution is entered. BUT, there are still possibilities that your ex-spouse will be included in your will. Basically, if you specifically write that your spouse will be included in your will, regardless of a divorce; or if the divorce decree specifically states that the ex-spouse is to continue to be included, then Florida law allows the ex-spouse to remain.
With such diverse laws, it’s vital to consult with an attorney as soon as you know divorce is coming. We can help you understand our state’s laws and how to best navigate them when creating your new will—whether you do so before or after your divorce is complete.
We have a client whose parents have been separated for about 15 years but aren’t divorced. They each live in their own home and each claim their own homestead. On paper, they are still married but each has a new significant other. However, I don’t believe that they have any legal documents stating that they want their previous partner to have legal rights over their current partner of their homestead. This is why it is a good idea to get an Estate Plan in place or updated as soon as a life changing event happens. We can be reached via email at email@example.com or schedule an intro call to help guide you through this process.
4. What’s Old Is New Again – Amend Your Trust
If you have a Revocable Living Trust set up, you’ll want to review and update it, too. Similar to Wills, the laws governing the if, when, and how you can alter a Trust during a divorce can vary greatly. In addition to reconsidering what assets your soon-to-be-ex spouse should receive through the trust, you’ll probably want to replace him or her as successor trustee, if they are so designated. If you don’t change the successor trustee then it will be left to your ex or soon-to-be-ex.
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 (like mine). 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. There are differences between a Will and a Trust.
Once again, Florida has default rules for estate planning once the divorce is final.
The Next Steps: Post-divorce planning
During the divorce process, your primary planning goal is limiting your soon-to-be ex’s control over your life and assets should you die or become incapacitated before the divorce is final. In light of this, the individuals to whom you grant Power of Attorney, name as trustee, designate to receive your 401k, or add to your plan in any other way while the divorce is ongoing are often just temporary.
Once your divorce is final and your marital property has been divided up, you should revisit all your planning documents and update them based on your new asset profile and living situation. From there, your plan should continuously evolve as your life changes, especially following major life events, such as getting remarried, having additional children, and when close family members pass away.
Get started NOW!
Going through a divorce is never easy, but it’s vital that you make the time to update your Estate Plan during this trying time. We can meet with you at any stage of the process to help make the best choice for YOU. Schedule an intro call or just email us at firstname.lastname@example.org to take that next step.
Procrastinating about updating your plan, even for a few days, as you are in the process of a divorce can make it legally impossible to change certain parts of your plan. And if you’ve yet to create any Estate Plan at all, an upcoming divorce is the perfect time to finally take care of this vital responsibility and invest in yourself.
 Many of the issues presented in this blog are heavily dependent on individual state law. The information in this blog is for general education purposes only. Addressing the issues raised in this blog should be done with the assistance of counsel admitted to practice in the relevant State.