The time both during and after a divorce can be turbulent and overwhelming. Often the newly divorced person misses the last piece of the puzzle on their “things to do list” for their new life: estate planning. In many cases, a family law attorney focuses primarily on dissolving the client’s marriage and making decisions regarding asset division, custody, child support, and alimony issues. This also is one of the times that you need to revisit your estate plan. Without it, your ex-spouse could be the beneficiary of your estate, or in the case of remarriage, the possibility of disinheritance.
There are a couple major areas where a few minutes of time can save you from (as described by the ex-wife whose former husband forgot to change his life insurance beneficiary from her to wife #3) “rolling over in the grave when the insurance company cut the check” to the wrong spouse. These areas include changing: your will or revocable trust, your medical and general power of attorneys, and your beneficiary designations. This article will briefly touch upon each of these issues.
Your Will or Revocable Trust.
Many people presume that a Will is revoked upon dissolution of marriage. Under Florida law, this generally is not the case. Where you have a Revocable Trust, unless it provides otherwise or you actively revoke or amend it, the Trust provisions continue to provide first for your spouse and then for your children. Thus, the provisions regarding how your property is to be distributed should be changed after a divorce.
During marriage, these documents typically provide either: first for the surviving spouse and then for your children; or in trust for the spouse and then upon death for the children. Obviously, most divorced persons do not want to take care of their former spouse financially. You may wish to change these provisions to benefit your children only; or if you re-marry, both your children and your new spouse. In the latter situation, it is important to look at a variety of options as how to best do this. Using additional life insurance can be one such option.
Additionally, when providing for your minor children, you may not wish your ex-spouse to have access to the monies left to your children. Thus, you may wish to draft provisions that create a trust for your minor children. The trustee may be given the power to allow for the payment from the trust for specific items, such as private school tuition, extra-curricular activities, college expenses and tuition. Direction can also be made so that the money for such items would not be paid to the guardian of the minor child (often your former spouse), and ensures the child truly benefits from such payments.
Another issue that should be addressed in your Will, is naming a successor guardian in the case that your former spouse either does not survive you, is incapacitated, or does not want to raise your children.
Many assets pass outside your Will or even Revocable Trust via a beneficiary designation, including:
- Employer retirement plans;
- Individual Retirement Accounts (IRAs);
- Life Insurance;
- Health savings Accounts; and
- Transfer upon Death (TOD) or Payable Upon Death (POD) bank accounts.
Assets that use a beneficiary designation like these pass to a named beneficiary pass under operation of contract. Thus, the designation of a beneficiary supersedes your will and the state intestacy statute. If you fail to change these designations, your former spouse who was the original designated beneficiary will be entitled to the benefit, despite being an “ex” or even changing your Will or trust. Beneficiary designation trumps the Will or state intestacy law.
Generally, changing these items is as easy as contacting the carrier, requesting a new beneficiary designation form, completing it and returning it to the holder of the account. This is very important as retirement and employer held retirement plans often are a significant portion of an individual’s net worth.
Medical and Financial Powers of Attorney.
Last but not least are your powers of attorney. Once you are divorced it is important to execute new healthcare durable powers of attorney, living wills, and new general durable powers of attorney (sometimes referred to as “financial powers of attorney”). These documents take effect while you are incapacitated and allow for some of the most important decision making for your benefit. And typically, we name our spouse to act on our behalf. If you have chosen to divorce, you usually will not want your ex-spouse to make health care or financial decisions in his or her hands. (As one client once said to me, “I don’t trust my ex farther than I can throw him. I certainly don’t want him to still have the power to take me off life support!”)
Even during the dissolution process, you may wish to revise your estate plan. If you die before the divorce is final, most states provide that the surviving spouse (even if he or she was in the process of becoming a former spouse) have certain statutory rights, whether at least half the estate through the intestacy laws or an “elective share” should they have been disinherited under a Will. There are ways, however, as discussed above, to limit the assets subject to such an election.
Through proper planning, there are a number of ways to avoid a former spouse from inheriting from you after (or even during) divorce. It is advisable to revisit your estate plan with a qualified estate planning attorney to help avoid the situations described in this article. Even before the dissolution process is complete, an estate planning attorney can work closely with your family law attorney to make the transition a smooth one.