The judge has recently signed your divorce decree. Now what? Although you may be tired of spending time and money on lawyers, you’ll still need to talk to an estate planning attorney. If you and your former spouse shared estate planning in the past, you’ll now need to make changes to avoid having your money and property distributed in a way you did not intend after you’re gone. If you have not done any planning, this is the perfect time to put your affairs in order. 

When you meet with your estate planning attorney, bring all your financial documents and a copy of your divorce decree. Your decree will determine what obligations need to be provided for, what accounts or property you now own, and how you own them.

What Is in the Divorce Decree?

Support obligations

Spousal or child support obligations may necessitate purchasing life insurance in case you pass away before fulfilling your obligations. If you have a child support obligation, have the life insurance policy owned by a trust allowing distributions to the minor children by a trustee instead of a lump sum payout to your former spouse, who may or may not use the funds as intended. (Make sure your former spouse agrees to this strategy.) 

Property Division

The divorce decree will outline the division of your marital property. This can present the estate planning attorney with an accurate picture of your current accounts.

How much you own matters, but HOW you own it is also important. Under state law, accounts previously owned by you and your former spouse as joint tenants or tenants by the entirety have more than likely changed to ownership as tenants in common. Because before your divorce, if you had passed away, your now former spouse would have likely received your share of the account or property automatically. Now that the ownership has changed to tenants in common, when you pass away, your interest will go to your heirs. If you don’t do any planning, the money will transfer according to state law, which may not coincide with your wishes. If you take action, you can choose who will receive your interest and how.

How Does a Divorce Decree Affect an Existing Estate Plan?

Last Will and Testament

Depending upon the state in which you live, divorce can have a varying impact on your will. In some states, a divorce revokes everything in your will that benefits your former spouse. Some state laws also revoke the appointment of your former spouse as your personal representative. In the District of Columbia, a divorce revokes the entire will. Should you die before executing a new will, the law will determine what happens to your estate. Even if gifts to your former spouse are revoked, the law may or may not revoke gifts you made to your former spouse’s family. This means you’ll need to revise this document as soon as possible. 

Revocable Living Trust

Similar to wills, the laws regarding your revocable living trust will vary. Some state laws revoke all provisions relating to the former spouse, while others leave the trust intact. Review your trust and make any desired changes, because, like wills, gifts to your former spouse’s family may or may not be revoked after the divorce.   

Financial Power of Attorney

In some states, a divorce revokes the former spouse’s appointment as an agent under a financial power of attorney. However, in other states, and the District of Columbia, a divorce does not do this. If you have any outstanding powers of attorney with third parties, inform them of your divorce and provide them with a revocation so they know your former spouse is no longer authorized to act on your behalf.

Medical Power of Attorney

Like other estate planning documents, state laws vary as to whether or not your former spouse will still be able to make medical decisions for you if you can’t make them yourself. Some states revoke the designation of your former spouse, while others do not. Regardless, keep this document up to date and provide it to your doctors.

Life Insurance

Because a life insurance policy is a contract with a third party, a divorce can complicate your insurance plans. If you named your former spouse as a beneficiary of the policy prior to your divorce, state law varies as to whether that designation is automatically revoked. Even if the designation is revoked under state law, you’ll need to change the beneficiary designation so the company is on notice of your wishes. In some cases, although the former spouse is no longer entitled to the life insurance proceeds, the benefit may be paid out to the named beneficiary (former spouse), and it will be the responsibility of the rightful beneficiary to sue and collect the proceeds from the former spouse. This can also create a lot of unpleasant drama.

Retirement Accounts

For accounts governed by the Employee Retirement Income Security Act of 1974 (ERISA), the designation is not automatically revoked. To ensure that your former spouse does not receive the benefits, you must change the designation. 

Your estate plan is more important than ever. 

As a newly single person, you are now in full control of your money and property. Without an estate plan in place, the state laws will determine what happens to your money and property after you’re gone. If you already have estate planning documents in place, review them after your divorce. Even if gifts to your former spouse are revoked under state law, you need to make sure that the alternate plan built into your documents is still what you want. Contact us today so we can schedule an appointment to protect your new future and those you love.

You can schedule a call with us or reach us directly at 855.528.9637 to learn more about how best to plan today to protect those most important to you.

​