What is estate planning and why does estate planning for divorce matter? Estate planning may be just one of many critical financial aspects to manage during a highly stressful time; however, because estate planning can have long-term ramifications for your children and loved ones, it must be a top priority. Here are three key considerations regarding estate planning for divorce:
Estate Planning Revisions
Revising your estate plan as you go through a divorce – or immediately after – can seem like an extra burden, but it can bring peace of mind knowing your loved ones are being provided for long-term. This is reason enough to carry through with this process. Another reason, though, is that an estate plan drafted in the early days of your marriage probably names your ex-spouse as the sole beneficiary of the estate. Few divorced individuals want this to be the case after divorce. What’s more, your ex-spouse may have been named as your power of attorney (POA) for financial or medical decisions or have control over your Living Will.
Simply put, if your existing estate plan – including your Last Will and Testament, Living Will, POA documents, retirement account designations, and more – does not match your current wishes, work with an estate planning attorney to update it. In particular, to ensure your children inherit your estate upon your passing, revising your estate plan can prevent your ex-spouse from inheriting your assets.
Creation of Estate Plan
If you do not have an estate plan, creating one during or upon divorce is crucial, especially for the benefit of your children. Estate planning allows divorced parents to choose how their estate will be administered upon their death. Establishing a comprehensive and legally sound Last Will and Testament can accomplish this, although a trust might also be appropriate depending on your family situation and the ages of your children.
Regardless of the legal instrument used, estate planning empowers you to designate how (and when) specific assets will be distributed to individuals of your choosing, including your minor children. Without certain estate planning documents in place, your estate will be considered “intestate” with your assets to be distributed according to statutory code. This can cause conflict among surviving family members, often forcing them to spend heavily on legal representation when upfront estate planning could have been much easier and less costly.
Estate planning for divorce also helps you designate one or more individuals to make important life decisions. For example, by creating a Power of Attorney document, you can choose who has the authority to make critical life decisions on your behalf should you become incapacitated. Authority designated by a standard POA generally terminates at the time of death or incapacity of the covered individual. A durable power of attorney document, however, remains in effect even if the covered individual becomes incapacitated mentally or physically.
Revising your estate plan to meet your needs after divorce is especially important because you will no longer have a spouse who is the default decision maker.
Necessary Documents to Update
Naturally, it is essential to update all the documents already noted – or to create them as part of estate planning for divorce if they do not yet exist.
For your Last Will and Testament, it is typical to remove your spouse as a beneficiary once divorce proceedings begin. If you do not already have a will, divorce can be a perfect time to prepare one to ensure your spouse does not automatically inherit your estate should you die “intestate.”
For revising trusts, check with your estate planning attorney. Certain trusts, such as an irrevocable living trust, for example, cannot generally be changed. Such a trust is typically designed to protect the interests of minor children with the spouse generally designated to control the trust until a child reaches the “age of legal majority” (which is age 18 in nearly all U.S. states). A revocable living trust, on the other hand, can normally be revoked or amended per the terms of the trust. As sole grantor of the trust, you can usually remove your spouse. Otherwise, divorce may trigger certain rules and restrictions.
For your revised POA documents, make sure both medical and financial matters are covered. Generally speaking, you can establish or update most estate planning documents even during the divorce proceedings. It is important to discuss this with your estate planning attorney and to legally revoke any prior POAs when drafting new ones.
Moving forward, if your designated POA individual or individuals cannot function due to their own death or incapacity, update your POAs as soon as possible. Of course, before establishing a new POA, confirm with your designees they are willing to serve as your advocate if needed and that they understand and agree how to carry out your wishes. For medical decisions, for instance, make your wishes clear regarding extraordinary care, including end-of-life and “Do Not Resuscitate” decisions.
It is also essential to update beneficiaries on life insurance policies and retirement accounts as permitted by law, removing your ex-spouse as soon as possible once the divorce is final. Be aware, however, that retirement accounts are often considered marital assets subject to accounting, rulings, and disposition in divorce. Consult with your divorce and estate planning attorney to ensure proper timing and management of these changes.
Key Takeaways:
Estate planning for divorce may add complexity to an already stressful time during divorce proceedings but is essential to protect your interests and those of your loved ones and provide peace of mind post-divorce. Here are some crucial considerations:
- If your existing estate plan – including your Last Will and Testament, Living Will, POA documents, retirement account designations, and more – does not match your current wishes, work with an estate planning attorney to update it
- If you do not have an estate plan, divorce can be a perfect time to establish one
- Regardless of legal instruments used, estate planning empowers you to designate how specific assets will be distributed to individuals of your choosing, including your children
- Without estate planning in place, your estate will be considered “intestate;” this causes your assets to be distributed according to statutory code
- Intestate distribution can often create chaos and conflict among surviving family members
- It is crucial to revoke, update, revise, and/or establish estate planning documents as soon as practicable either during or immediately after divorce
- Before establishing or revising estate plan documents, consult an estate planning attorney such as those at Dixon & Moseley, P.C.
At Dixon & Moseley, P.C., our attorneys and legal team members have many decades of collective experience helping clients navigate estate planning for divorce. To learn more, contact us today at (317) 972-8000. We’re here to advocate for you.
This blog post provides general educational material about estate planning for divorce. Being an educated legal consumer can help you make the most of the legal experience in meeting your legal objectives. This information is presented by attorneys at Dixon & Moseley, P.C. who practice throughout the State of Indiana. It is not a solicitation, nor is it intended to provide specific legal advice. This is an advertisement. Information contained herein is subject to change.