Estate Planning After a Divorce

During a divorce, the immediate problems of property division and child custody overshadow any long-term planning. Trying to figure out which documents need to change and which need to be thrown out is time-consuming, yet essential to keeping your future secure.

Breaking Point

The legal end of a marriage can spark disagreements over power of attorney or property distribution. Many people assume that legal powers granted to a spouse end at the start of a divorce; however, they actually last until a judge officially dissolves the marriage. Knowing this, it is important for people going through divorce to consider whether or not is is necessary to change estate documents more immediately—even if they will have to update them again when they officially divide the property.

Amending Legal Documents

Always check with your legal counsel before making any changes to legal documents during a divorce; many documents have restrictions on alterations.

Changing a last will and testament is the first logical step in altering an estate plan after or during a divorce. Most states accommodate this view with provisions that automatically block a former spouse’s inheritance in a pre-divorce will.

Changing a will during a divorce comes with some challenges. Unless owned outright by the person filing the will, the future of specific property is usually uncertain. Wills addressing marital property will require a second revision after the divorce finalizes. However, if a person intends to simply state that “all my property” should go to a person or trust, he or she should have no problem making immediate adjustments.

Much like a will, a person should change his or her power of attorney as soon after a divorce as possible. Even though power of attorney requires responsible action from whoever holds it, conflicts erupt when a family must submit to the judgment of a divorced spouse. Altering a power of attorney document is not a time-consuming process when simply switching one person for another.

Beneficiaries

One of the easiest estate documents to alter is the beneficiary document on insurance policies or retirement plans. Because of their general accessibility, it is often tempting for people to alter them as early into a divorce as possible. Always consult with a lawyer before making any changes to a retirement fund or insurance plan. Until a marriage ends, a husband and wife have fiduciary responsibilities for money management—by law they must do what is best for the spouse. Any action to remove access to benefits could be interpreted as a legal violation of spousal duty. Retirement funds should never be changed without both spousal and legal consent.

In addition to general liability, many divorce papers (particularly in California) are served with an automatic temporary restraining order (ATRO). Though the major concern of ATROs is child protection, they also contain a restriction on changing beneficiaries of life insurance policies or any other monetary agreements. Until a divorce is complete, all borrowing, selling, changes to property, changes to benefits and bank accounts should only be done with the direct approval of a lawyer.

It is important to note that while most states automatically block a former spouse from inheriting through an earlier will, they do not block beneficiary status. Retirement funds, life insurance policies, pensions and, if possible, irrevocable wills must be explicitly changed to remove a person as beneficiary.

If you are currently going through a divorce, consult a lawyer to check the legality of any changes you plan to make. If you have already finalized a divorce, review your estate documents immediately to ensure they reflect your wishes. With legal guidance, changes to your estate plan do not have to be another burden on your mind.