Can I Change My Estate Plan, Before, During or After My Divorce?

By Jill M Rynkowski Doyle, Esq., CDFA On 05/29/2020

Divorce is complex, emotionally draining, and expensive!  Once complete, individuals often are tired of meeting with lawyers and do not want to take on another legal “to do”.  But the reality is that accidents and deaths occur while couples are in the process of divorce.  If you do not plan appropriately you may find your soon to be ex-spouse making decisions on your behalf or they may receive more of your estate than you would like.

While many states have adopted laws that determine how a divorce affects an individual’s estate plan, the results may not be what you hope for. You can, and often should make changes to different elements of your estate plan before, during, and after a divorce. When changing documents, it will be important to discuss these matters with your family law attorney and your estate planning attorney.  

Health Care Proxy/Health Care Directives/Living Wills

You (principal) can change your health care directive and living will at any time. This is highly recommended as you will likely not want your estranged spouse (agent), making health care decisions for you. Some states have enacted statutes which say a Health Care Agent’s authority will terminate upon filing for divorce or upon the final dissolution of marriage. Still, you need to check your state statutes to confirm. Further, while statutes may determine the agency terminates, you will want to draft a new document to be sure your primary and successor agents are first choices.

It is worth noting that some states have laws to protect principals in the event of domestic violence. These laws prevent an individual from serving as agent for a principal who has filed a protective order against them.  

Powers of Attorney

Many states provide that an attorney-in-fact’s authority will terminate when the principal files an action for divorce against the agent or at such time as the divorce is final. It is worth investing the time to change your Power of Attorney before or during your divorce process. Bear in mind, however, that during divorce, there may be limits on what you can and cannot do with your individual and joint assets. The individual who serves as your new attorney-in-fact for financial decisions will need to be aware of your pending divorce and appreciate your circumstances’ sensitive nature.

Wills & Revocable Trusts

State laws vary regarding how filing for divorce or the receipt of a final divorce decree affects a will or revocable trust. For example, in the District of Columbia, the will is revoked in its entirety once the divorce is final. If an individual does not draft a new will post-divorce, he or she will be considered to have died intestate (without a will). In Virginia, the former spouse is treated as if they predeceased the testator, and the will survives. In Maryland, all terms of the will related to the former spouse are revoked, but the will survives the divorce.

Regarding Revocable trusts, in the District of Columba and Virginia, divorce does not revoke a provision in a trust relating to a former spouse. In Maryland, however, state law provides that the divorce will revoke all provisions related to the former spouse.

Some states go further to address family members of the ex-spouse, essentially revoking any distributions of assets or appointments to serve as executor. While the will may survive, these individuals may be treated as if they had predeceased the maker of the will.

In many cases, drafting a new will and trust (where necessary) is the best course of action. You will want to make sure you have identified where your assets will go as well as who will serve as executor, trustee, and guardian of your minor children, if any. Further, you will want to be sure your estate planning attorney is knowledgeable about your final divorce settlement. Drafting an estate plan in the context of the settlement obligations is the best way to protect your family members from dealing with any conflicts between your estate plan and the settlement agreement.  

Irrevocable Trusts and Irrevocable Life Insurance Trusts

Addressing irrevocable trusts can be more complex. By their nature, they cannot be amended. If a soon to be ex-spouse is a named beneficiary of an Irrevocable Trust, it is unlikely you will be able to terminate the trust and retrieve the assets. You may be able consider those assets during your divorce and property division. If a spouse is currently serving as trustee or is a named successor trustee, you may want to negotiate their resignation or declination to serve. In these challenging situations, it is often a good idea to appoint a trusted advisor to serve as a private trustee. 

There are some planning techniques which can be employed to address Life Insurance Trusts; it is wise to consult with an experienced Estate Planning attorney as the financial and emotional consequences of a poorly executed plan can be significant. 

Beneficiary Designations

You will want to review and update your beneficiary designations for annuities, life insurance policies, and IRAs. Some states have laws which may revoke beneficiary designations upon dissolution of marriage. However, it is always a good idea to revisit your financial accounts on a regular basis.  

In addition, divorce does not revoke beneficiary designations for accounts governed by federal law (ERISA). You will need to update beneficiary designations for company 401(k), 403(b), and other retirement plans as well as any corporate life insurance policies (contact your plan administrator to assist you with this process).

It may be tempting to let your estate planning wait for a period following your divorce, especially if your divorce has been particularly difficult. It is well worth the time and effort to review all of your documents to confirm you have the right provisions in place and designated the people you would like to serve as your power-of-attorney, health care proxy, executor, trustee, etc. Well-planned planning not only sets you up for longer-term success but also helps ensure that what you have worked so hard to secure will ultimately go to those you have chosen to receive.

Tagged with: estate planning, divorce, financial