Updating your Estate Plan after Divorce

May 1, 2015

Almost everyone who has been divorced or is ending their marriage needs an estate planning checklist for divorce. It’s imperative they revisit their estate planning documents to avoid inadvertently giving their ex control over their estate. While the divorce process attempts to equitably divide assets, it usually falls short of addressing the estate planning needs of clients. In addition, it is prudent to revise estate planning documents during a divorce to ensure your wishes are carried out, as a contentious divorce can often last many years.

Updating of all estate planning documents should obviously be carried out. There are two areas, however, that deserve special attention – pension plans & minor children.
In most states, if you get divorced, a state statute automatically treats the ex-spouse as being pre-deceased in your documents.  This means if you named a former spouse as a personal representative, executor, or as a beneficiary of your estate, they will be automatically removed. Many people believe they can rely on such a statute to handle their estate planning documents. There are multiple problems with this approach. First, the statute only goes into effect upon divorce (if you pass during a multi-year divorce battle, everything may pass to your spouse regardless). Second, certain retirement plans governed under a portion of Federal Law called the Employee Retirement Income Security Act also known as ERISA (such as 401K’s and pension plans) will preempt the state statute from taking effect. Therefore, your ex-spouse may still inherit your retirement plan even after a divorce is final.

Another common issue we see is when a Decedent leaves all their assets to a minor child. Most state laws require a guardianship until the minor is 18. This is an expensive process and one of the unanticipated circumstance people fail to recognize is that the ex-spouse usually is appointed guardian. While this may be acceptable under some circumstances, most individuals balk at the thought of their ex-spouse getting control over all the assets. Therefore, it is strongly recommended that a client dealing with or already divorced set up a trust to handle any assets that may pass for the benefit of a minor.

In addition, some states such as Florida have unique restrictions on the devise of homestead. For example, if you have minor children, you may be required to leave your homestead to them regardless of what your Will provides. Just imagine the irony, you pass away leaving everything to your minor child, and then your ex-spouse moves into your home as the nominated guardian of your minor child.

Proper planning by anyone leaving you assets may also mitigate the effects of a future divorce. By leaving assets in trust, it may be possible to ensure they are not counted against a party for equitable division. It is important to see an attorney well versed in this area, as this is a constantly evolving area of the law.

These are just a few of the circumstances we often encounter when dealing with the estate of an individual who is in the process of a divorce or who has failed to update documents after a divorce. Here is a quick checklist to address some of the most prevalent issues:

  1. Update your Will and/or trust;
  2. Update your Durable Power of Attorney, Living Will, or Health Care Surrogate;
  3. Update your beneficiary designations on all accounts and insurance policies;
  4. Review how your cars are titled;
  5. Update and/or nominate a guardian for any minor children and for yourself;
  6. Ensure your house is properly titled and/or devised in your will;
  7. Review the titling of all financial accounts;
  8. Revoke all prior estate planning documents and powers of attorney;
  9. Ensure all post-divorce settlement requirement are handled (i.e. life insurance); and
  10. Speak with relatives (i.e. parents) to ensure their estate plans take into consideration your divorce. 
Written by D.W. Craig Dreyer, Esq.