Going through a divorce is never easy. On the contrary, even the most amicable divorce typically causes increased stress and anxiety. It comes as no surprise then that updating your estate plan is probably not at the forefront of your mind if you recently went through a divorce. While that is certainly understandable, I always urge our Durham, Raleigh, Cary and Chapel Hill area clients at Clarity Legal Group® who experience a divorce — or even the separation from a long time partner — to promptly focus on updating their estate plans.
Reasons to Update Your Estate Plan after a Divorce
Like many married couples, your estate plan probably reflects your marital status. Your spouse is likely the beneficiary of many of your assets in your estate plan and you probably hold some assets jointly. Some married couples have estate plans that are even more intertwined, such as plans that include reciprocal Wills or Joint Living Trusts. You may also have appointed your spouse to important fiduciary and decision-making positions within your estate plan. All of that makes sense while you are married. However, if you decide to end the marriage you should update your estate plan to reflect the change in your status as soon as possible. Always consult with your estate planning attorney before actually making any changes to your estate plan that are the result of a divorce because the status of the divorce process and related laws divorce laws may require you to wait until the divorce is final or a least a property settlement is reached before making any changes to beneficiary designations or changes in how property is titled. I like to speak with the family law attorney representing our Clarity Legal Group® clients during the divorce process so that appropriate changes can be coordinated for the client.
The Consequences of Failing to Update Your Plan
Once divorced, you probably don’t want your now ex-spouse to be the beneficiary of your life insurance policy (unless it is as the Trustee for your minor children) nor do you want him or her to inherit your assets. Worse still, imagine failing to update a Health Care Power of Attorney that appoints your spouse as your Agent for making health care decisions for you in the event your incapacity prevents you from making them yourself? While the reasons to update your plan are clear, the problem is that people are often still dealing with the emotional fallout from a divorce and they don’t stop to think about the practical ramifications of the divorce.
Common Documents that Need Updating
Of course, your estate plan should be as unique as you are. As such, your plan may not include all of the following documents and/or may include additional documents that need to be updated. The following, however, are some common estate planning documents that need to be reviewed and revised after a divorce is final:
- Last Will and Testament – Along with removing your spouse as a beneficiary under the provisions of your Will, you would typically remove him or her as the Executor of your estate and appoint someone new to the position.
- Trust Agreement – A trust is a very popular element of a typical estate plan. If your plan includes a trust, and you appointed your spouse to be the Trustee of the trust, you may need to amend the trust agreement to appoint a new Trustee. Furthermore, it is not uncommon for your Trust Agreement to provide that your spouse inherit from you after death under a further Trust Arrangement. You will want to remove your spouse as a beneficiary and also remove provisions relating to that further trust.
- Life Insurance — If you have a Trust, we will have provided that your Trust be the beneficiary of your life insurance. If this is the case, changing the provisions of your Trust Agreements, as I just describe, will take care of things. If you have not named your Trust as beneficiary or do not have a trust, your spouse is also likely the primary beneficiary of your life insurance policies. This should be change. Of course, before changing this, make sure that your separation agreement as adopted by the final order in your divorce proceeding does not require you to continue to maintain life insurance that names your spouse as the beneficiary which is sometimes the case when minor children are involved. We strongly recommend that such a requirement not be part of your separation agreement and that instead, if children are to be provided for through life insurance that this be done through a trust for the children, which would be named as the beneficiary of the life insurance. Your former spouse — or someone else — might serve as the Trustee of this Trust.
- Power of Attorney – At some point you may have executed a Power of Attorney naming your spouse as your Agent. You will want to terminate the Power of Attorney as soon as possible. The best way to terminate a Power of Attorney is to replace it with a new Power of Attorney. Additional steps may be necessary if the Power of Attorney has been filed at the court house.
- Advanced Directive – If you have a Health Care Power of Attorney in place you probably named your spouse as your Agent, giving him or her the legal authority to make health care decisions for you if you are unable to make them at some point. Executing a new one naming someone else as your Agent should resolve this problem.
Contact our Durham Estate Planning Attorneys
If you have questions or concerns relating to the updates you should make to your estate plan following a divorce, please contact the Durham estate planning attorneys at Clarity Legal Group® by calling us at 919-484-0012 or contact us online.