It happens! People get divorced and many of those couples have already done their estate planning. What happens to those assets and those appointments of executors, agents and proxies? How does divorce affect those well-thought out (and expensive) plans?
Let’s face it. By the time you are done with your divorce, the last person you want to see is another lawyer. You have probably spent a lot of money and time, not to mention untold sleepless hours, thinking about your ex and your children and possibly even your stuff. Once the ink is dry on the Order of Divorce, you want a break from lawyers, maybe forever. I can’t blame you!
However, not so fast as they say. The last thing you want would be for your “ex” to inherit from you if you were to die anytime soon. The last thing you would want is for your “ex” to be the one making decisions about pulling the plug if you are in the hospital. You therefore have one more task to deal with before the divorce is entirely behind you! Thankfully it is much easier and much less expensive than the divorce itself.
Here are the details you must consider:
Your Will (or trust) – It needs to be changed to remove your ex wherever he (or she) is in the document. If a joint trust, it might make more sense to terminate it and start over since your ex-spouse might still have rights under the trust agreement. It certainly makes sense to disinherit your ex-spouse wherever possible. If your joint children are still minors, you might not even want your ex-spouse to be a trustee of your minor child’s inheritance either, which would be the default position unless you take specific actions to the contrary.
Your Power of Attorney– In most cases spouses have one another in the role of Agent so you will want to revoke the current Power of Attorney and create a new one that states you are now unmarried and that names someone else as your Agent. You would also want to notify your ex that you have revoked the POA that he (or she) was named in to close the loop on the old POA.
Your healthcare documents– Again, state in them that you are now unmarried and name new Proxies who make all medical decisions for you. While it is doubtful that any ex would want to become involved in healthcare, it could happen so you might as well be safe than sorry. On your HIPAA waiver, you might even state that under no circumstances can your ex have any access whatsoever to you or your medical condition, again, just to be safe.
Other details to consider:
Burial or cremation plans– Did they involve your ex? Did you own plots together? Would you need to change that now? Who is named in your Final Disposition Instructions to make whatever plans are needed after your death? If your ex, then now is the time to change that nomination!
Beneficiary designations– Things like your IRA or 401(k)/403(b) for example. Many people have their spouses named as their default choice but you must change this immediately. Life insurance– even the policy provided through your employer, needs to be addressed so you can name a new beneficiary. Pensions– if your ex-spouse was to receive a portion of your pension after your death, you need to consult with the benefits office at your former employer to learn how to change this, if at all.
Guardianship designations– If your children are minors and you have custody, upon your death your ex will become the custodial parent. There is not much you can do in your estate plans to change that. However, you can still nominate a Guardian to serve if he (or she) becomes unable to serve as their Guardian. This would hold some weight with the Court and might keep his(or her) parents from stepping in should your ex also die.
It is worthwhile to note that Alabama law changed not too long ago to say that the finalization of a divorce acts to terminate the appointment of a spouse as Executor, Agent, etc. This law provides for the revocation, by divorce or annulment, of certain documents, such as revocable inter-vivos trusts, life insurance and retirement plan beneficiary designations, transfer-on-death accounts, and other revocable dispositions to the former spouse that a divorced individual established prior to the divorce or annulment. The law is located at §30-4-17, Alabama Code.
HOWEVER, we have seen ex-spouses collect on insurance policies despite the change in the law. The insurance company (or bank, credit union, or investment firm) doesn’t know about the divorce and if the ex-spouse doesn’t tell them and his name is still listed, who is to stop him? It is much harder to get the money back than it is to stop it from leaving in the first place. That is why we encourage all divorce clients to update their estate planning and the best time to do it is during the divorce, not once it is over. Call us to learn more!