Going through a divorce is gut-wrenching. Even in the most amicable of divorces, each partner has to navigate the emotional and legal complexities that come with the unwinding of a formerly joint life. There are an overwhelming amount of changes to contend with – and those changes seemingly come all at once. To say that divorce is hard is an understatement.
Having a great team around you as you go through the process can help: your lawyer, mediator, financial planner, advisors, friends, family. But what happens when the process is “done”? When the settlement has been signed, the decree has been entered, and you start your “new” life? What happens next?
One of the first things you should do is think about your estate plan. Why? Well, if you haven’t created one, you will have to appoint people to certain roles that your ex-spouse may have previously stepped in to fill for you. And, even if you have an estate plan already, you likely have your ex-spouse named as a beneficiary, agent, Executor, and/or have delegated other authority to him/her in that estate plan. (Doing so is perfectly legal, of course. However, your intentions and needs have likely changed following your divorce).
For example, if you already had an estate plan in place prior to your divorce, you likely named your ex-spouse as your Agent under your Power of Attorney and Health Care Proxy. Do you want that person to have financial authority with respect to your accounts? Do you still want your ex-spouse in the hospital room with you, making decisions for you, if your health is failing? Maybe! But for many, the answer to that question is likely “No”. To appoint a new person as your agent for medical and financial purposes, you need to revoke your “old” Power of Attorney and Health Care Proxy. And, you need to have a new Power of Attorney and Health Care Proxy drawn so that you can name new agents. Your estate planning attorney will prepare both the revocations and the drawing of new documents that reflect your current needs and desires.
And what if you have children? Do you want your ex-spouse to be their guardian should something happen to you? Maybe you do. Maybe you don’t. If you don’t, you will need to update your Will as that is the document that allows you to nominate a guardian for your minor children.
***PLEASE NOTE: It is not always easy to remove custody from a biological parent, but, by putting things in writing, a judge will be able to at least review your concerns when and if the time ever comes that a guardian for those minor children needs to be appointed.
You should review your Will even if you do want your ex-spouse to be named guardian for your minor children because your ex-spouse is probably named as a beneficiary under your Will (and he/she may even be your Executor). If so, you may want to give your ex-spouse’s share to another person or organization. And you may want to nominate a new Executor.
At this time, you may also want to consider a Trust. A trust will allow you to plan for incapacity in a way that a Will cannot. A trust also allows you to plan for those with special needs, to protect assets, and to provide a plan, which you can tightly control, for distribution of your assets both while you are alive and after you pass away. Not everyone needs or wants a trust, but for some people, a trust is a very useful tool. Your estate planning attorney will discuss your individual needs with you and explain your various options with respect to a will and a trust. Then, you can decide on the best course of action for your estate plan.
After your divorce is finalized such that you know which, if any, assets must be kept for your spouse as part of the settlement, you will also want to review the beneficiary designations on your various accounts (IRA, 401K, Life Insurance, payable-on-death bank accounts). It is probable that your ex-spouse was or is named the beneficiary on many of those accounts. Do you still want that person named as your beneficiary? If you do, that is perfectly legal. But that may not still be your intention now that you have divorced.
Of course, you will need to redraft your documents and your beneficiary designations so that they don’t violate the terms of your divorce agreement. Be sure that you understand what was agreed to in the divorce – you don’t want to face litigation down the road. It is important that your estate planning attorney carefully review your divorce agreement before working with you to prepare your new estate plan.
Divorce is difficult. There’s no way around it. And perhaps you want your ex-spouse to still assume many of the roles discussed above – which is wonderful. But if you want to make changes, and many do, the time to make those changes is as soon as possible after your divorce is legally finalized, if not sooner. And, as always, you want to review and update your plan regularly every three to five years, or whenever you have a major life event.
