If you’re going through (or have recently gone through) the emotional and financial turmoil of a divorce, estate planning may be the last thing on your mind. But after a divorce, you need to take steps to update your estate plan. Here are three steps you can take to make sure your estate plan reflects your current life and wishes:
1. REVOKE YOUR WILL AND MAKE A NEW ONE. Start by revoking your old Will (literally tearing it up is the best way) and making a new one. If you don’t already have a Will, now’s the time to make one. The same is true if you made a living trust while you were married.
A Will is a document where you:
* Leave your property to the people of your choice.
* Name a Personal Representative to wrap up your estate when the time comes.
* Nominate a guardian to take care of minor children if it’s ever necessary.
All of these choices may be affected by divorce. If you’re like most people, if you made a Will while you were married, you left everything to your spouse—probably not the result you want now. It’s best to start fresh with a new Will, naming new beneficiaries and alternate beneficiaries, who would inherit if your first choice didn’t outlive you.
In most states, if you get divorced after making a Will, any gifts that your Will makes to your former spouse are automatically revoked. For example, Washington law says that dissolution (divorce) of a marriage revokes any gifts that your Will made to your former spouse. The rest of the Will is not affected. But it’s not a good idea rely on state law. Not every state has a law like Washington’s, and laws can change.
Relying on state law also can create some uncertainty about what happens to the property you left to your former spouse, if state law revokes that provision of your Will. The general rule is that the property passes as though your former spouse had died before you did. So if your Will named an alternate (contingent) beneficiary for that gift, that beneficiary inherits. If you didn’t name an alternate beneficiary, but did name a “residuary beneficiary,” then that beneficiary inherits. Otherwise the property passes under state law, as if there were no Will, to your closest surviving relatives.
Those potential complications underscore the importance of making a new Will. That way, it will be clear about who you want to inherit, and you can name alternates as well.
If you don’t want your ex spouse to inherit your property, you probably don’t want them in charge of your estate either. But if you named your spouse as your Personal Representative, it could happen unless you make a new Will. Again, in many states, divorce revokes the appointment of a former spouse to serve as PR of the estate or Trustee of a Trust. The alternate PR, if you named one , would serve instead. Still, don’t count on state law—in your new Will, appoint a new PR and an alternate.
A key reason that many parents of young children make Wills is to name a guardian who would raise their children in the unlikely event neither parent could. If you have kids under 18, that’s one reason you want to make a Will. A court will appoint a guardian to care for a child only if both parents are deceased or unfit. (And courts find a parent unfit only if there is a serious and ongoing problem, such as a history of child abuse or addiction.) If you don’t want your ex spouse to raise your children in the event of your untimely death because you don’t think he or she is a good person or a good parent, it’s probably not something you can prevent.
In your Will, however, you can name whomever you choose to serve as guardian, in case both you and the other parent aren’t available. (It is, thankfully, rare for both parents to be unavailable.) If you feel strongly that the other parent shouldn’t have custody of your children, so say in your Will and write down your reasons in a separate writing and attach it to your Will. It will at least give the judge something to consider.
2. UPDATE BENEFICIARY DESIGNATIONS. As important as your Will is, it might now cover some of your most valuable assets. Many assets pass outside of a Will, to beneficiaries named on paperwork provided by a retirement plan administrator or insurance company. So be sure to update your beneficiary designations for:
* Life insurance policies
* Retirement accounts such as IRAs and 401(k)s
* Pay-on-death bank accounts
* Transfer-on-death brokerage accounts
To name a new person to inherit these assets, request new documents from your insurance company, brokerage company, or employer and submit them as soon as possible.
Don’t assume that state law (or even the terms of a divorce decree) will revoke any earlier designations you made naming your former spouse. Certain “qualified plans,” such as 401(k)s, pensions, and employer-provided life insurance policies, are governed by a federal law called ERISA (the Employee Retirement Income Security Act) and ERISA says that a plan administrator must turn funds over to the beneficiary named in the plan documents—no matter what state law says. So if your former spouse is still the named beneficiary, they will inherit unless you change the paperwork.
3. MAKE NEW POWERS OF ATTORNEY. Powers of attorney—documents that give someone authority to act for you if it’s ever necessary—are a big part of an estate plan. You should have two powers of attorney: one for healthcare (medical decisions) and one for financial matters. If you already have powers of attorney that give your former spouse authority to make decisions on your behalf, revoke them and make new documents.
If you or your friends or family members have questions about of the above information, give us a call at 253.858.5434 to see how we can help. We represent clients throughout Washington and Idaho and are available to meet in person, by phone, or via Skype or FaceTime.
