Estate Planning Tips During a Divorce

If you are in the process of divorcing or considering divorce, many details will need your attention. One thing many people overlook during and after a divorce is their estate. Unless a portion of an estate is part of a marital settlement agreement, many people never think about what needs to be done with their estate if they divorce. This article will provide some basic guidelines for estate planning during a divorce and what should be done after a divorce. Read on to learn more estate planning tips during a divorce.  

If You Are Not Divorced, Don’t Change Anything On Your Own

The first and most important thing to remember is that you are not allowed to move money while still in the divorce proceedings. Many jurisdictions even issue a joint preliminary injunction or have an automatic stay with divorce proceedings. That means that the courts forbid you from selling or moving assets until they have been evaluated to see if the assets are marital. Don’t buy a house or a car, don’t sell anything unless it is part of the divorce, and don’t liquidate and move anything. This can include portions of your estate, so you cannot change any beneficiary designation currently in place until after the divorce is final.  

Before making any financially based decision during the divorce process, consult with your family law attorney. Do not rely on a financial advisor or banker to tell you what you can and cannot do with your estate during a divorce.  

Review Your Current Estate Plan

It may have been a while since you looked at any estate planning documents you have. Locate the documents and perform a thorough review. You need to refresh your memory and figure out what will need to be changed, either now or once the divorce is final.  

Review Any Prenuptial Agreement

Prenups are a great way to simplify divorces. If you have addressed certain estate documents or all of your estate plan in the prenup, that prenuptial agreement will dictate your actions moving forward. For instance, if you agreed that your spouse would get all of one specific retirement plan in the event of a divorce, then that agreement stands. On the other hand, if you made certain in the prenuptial agreement that your spouse would get none of your estate in the divorce, then that agreement will also stand. Think carefully about what you are willing to part with before signing any prenuptial agreement. Always have an attorney review it before signing one. The same advice applies to any post-nuptial agreement.  

One Thing You Can Do Immediately

Update your living will and healthcare power of attorney documents, also known in many jurisdictions as “advance directives.” If you are incapacitated or unconscious, you probably have your spouse listed as the person you want to make healthcare decisions for you. It would be best if you changed that now. Choose a parent, sibling, or close friend if you are in a hurry. You do not want your spouse to be able to make healthcare decisions for you anymore, so you need to act quickly. If you and your spouse also completed other power of attorney documents for each other, locate them and show them to your family law attorney. It would help if you revoked any power of attorney, you have given your spouse and possibly choose a new power of attorney.  

Do Not Alter The Beneficiary Designation On The Following Assets

If your spouse is listed as a beneficiary on any of the following accounts, you cannot change them until the divorce is final:  

• Your retirement account  
• Any pension you receive or will receive  
• Any life insurance policy  
• Any joint revocable trust, both spouses typically retain control over that trust and split it in the marital settlement agreement  

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If You Have a Will, You Can Update It Immediately

Since nothing in a will takes effect until you pass on, you can update your will to exclude your current spouse, ensuring they do not inherit anything from your estate. You also may want to name an alternate guardian for your minor children in case it becomes an issue. Your current spouse will most likely get the children if you die, but you should name an alternate guardian just in case. If you don’t have a will, you can create one and include language that excludes your current spouse explicitly if that is your wish; however, you should keep in mind that if you include assets in your will that might be split in the divorce, you cannot expect the will to override that, you can only leave what you have at the time of your passing. Your estate planning attorney can draft language around your current marital situation and create a document that will protect you from having your current spouse inherit.  For more information on what happens to your estate plan after a divorce read our article, How to Update Your Estate Plan When You Remarry | Estate Planning for Second Marriages.

If you do not have a will, it would be a good idea to consider getting even a simple one created. If you pass on before your divorce is final, many states will consider your current spouse as the next in line. Having a will ensures that your current spouse cannot inherit your estate. There is always the possibility that your current spouse could contest the will. Still, you can include a no-contest clause in your state law that allows it, and they will have to spend their own money to pay for the will contest, which you need to decide if you want to happen.  

Revocable Trust

If you have a revocable trust, you may modify it. You may amend your revocable trust if your spouse is listed as a beneficiary. You may also amend the trust if it grants gifts to members of your spouse’s family. If you have a revocable trust that contains gifts for your shared children and lists your spouse as the trustee, you will most likely want to amend the trust to change that designation. If you do not change the trust designation, your ex-spouse will have control over your children’s money until they reach their majority, which could be unacceptable in the long run. Choose a different trust guardian if your trust contains a gift for your children.  

Trust Fund

If you have a trust fund, it is likely already protected by its construction; the trust document will make it clear that it is meant for you and you alone. Generally speaking, a trust where you are the only designated beneficiary is not considered by courts to be a marital asset subject to division. Check the terms of your trust fund carefully, and be sure to bring it to your attorney’s attention.  

Have An Action Plan For When The Divorce Is Final

You will most likely have many things to do once your divorce ends. Some of those things will be to comply with whatever the marital settlement agreement instructs you to do. Other urgent tasks to complete will be to update your estate documents to reflect that you are no longer married and that your spouse is no longer your beneficiary. In some cases, a spouse will be awarded a portion of retirement or something similar in a divorce settlement. If your spouse was awarded anything, take care of the paperwork immediately; don’t let it sit. The sooner you clear your spouse off of all estate documents, the sooner you will be able to leave it behind you and move on. Additionally, if you wait and still have your ex-spouse on the estate documents, they could receive something or have power over you if you are injured or pass away.  

SO that should provide you with enough information to start asking your family law attorney and your estate planning attorney the right questions as you plan to alter your estate after your divorce. Once again, a warning: when you file for divorce, you are urged to move any assets considered marital before the court reviews them and grants an otherwise. Bring any issues regarding your estate to your attorney’s attention before making any moves. The court will not take kindly to you making any alterations to your estate that look like you may be trying to hide assets. If you are in the middle of a divorce or are planning on filing for divorce, feel free to give the family and estate law attorneys at O’Flaherty Law a call, we would be happy to help you.  

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