Because getting divorced can be overwhelming on so many different levels, updating your estate plan often takes a back seat to other seemingly more-pressing priorities. But failing to update your plan for divorce can have potentially tragic consequences, some of which you may have never considered before.
In fact, this is something your divorce attorney probably won’t think to bring up, but it’s literally one of the most critical matters you need to handle if you’re ending your marriage. Last week, I discussed the first two estate planning changes you must make—updating your power of attorney documents and beneficiary designations—and today we’ll share the remaining three.
3. Create a new will
You should create a new will as soon as you decide to get divorced, because once you file, you may not be able to change your will. Rethink how you want your assets divided upon your death. This most likely means naming new beneficiaries for any assets that you’d previously left to your future ex and his or her family. And unless it’s your wish, you’ll probably no longer want your ex—or any of his or her family—listed as your will’s executor or administrator, either.
California has community-property statutes that entitle your surviving spouse to a certain percentage of the marital estate upon your death, regardless of what’s in your will. This means if you die before the divorce is final, you probably won’t be able to entirely disinherit your surviving spouse through the new will.
However, it’s almost certain you wouldn’t want him or her to get everything. Given this, you should update your will as soon as possible once divorce is inevitable to ensure the proper individuals inherit the remaining percentage of your estate should you pass away while your divorce is still ongoing.
4. Amend your existing trust or create a new one
If you have a revocable trust set up, you’ll want to review and update it, too. Like wills, the laws governing if, when, and how you can alter a trust during a divorce are complex. In addition to reconsidering what assets your ex-spouse should receive through the trust, you’ll probably want to replace him or her as a successor trustee if they are so designated.
And if you don’t have a trust in place, you should seriously consider creating one, especially if you have minor children. Trusts provide a wide range of powers and benefits unavailable through a will, and they’re particularly well-suited for blended families. Given the likelihood that both you and your spouse will eventually get remarried—and perhaps have more children—trusts are an invaluable way to protect and manage the assets you want your children to inherit.
By using a trust, for example, should you die or become incapacitated while your kids are minors, you can name someone of your choosing to serve as successor trustee to manage their money until they reach adulthood, making it impossible for your ex to meddle with their inheritance.
Beyond this key benefit, trusts afford you several other levels of enhanced protection and control not possible with a will. So you should at least discuss creating a trust with an experienced lawyer before ruling out the option entirely.
5. Revisit your plan once your divorce is final
During the divorce process, your main planning concern is limiting your soon-to-be ex’s control over your life and assets should you die or become incapacitated before divorce is final. Given this, the individuals to whom you grant power of attorney, name as trustee, designate to receive your 401k, or add to your estate plan in any other way while the divorce is ongoing are often just temporary.
Once the divorce is final and your marital property has been divided up, you should revisit all your estate planning documents and update them accordingly based on your new asset profile and living situation. From there, your plan should continuously evolve along with your life circumstances, particularly following major life events, such as getting remarried, having additional children, and/or when close family members pass away.
Don’t wait; act now!
Even though divorce can be one of life’s most difficult transitions, it’s vital that you make the time to update your estate plan during this trying time. Meet with a trusted estate planning attorney to review your plan immediately upon realizing that divorce is unavoidable.
Putting off updating your plan, even for a few days, during a divorce can make it legally impossible to change certain parts of your plan, so act immediately. And if you’ve yet to create any estate plan at all, an impending divorce is the perfect time to finally take care of this crucial task.
Dedicated to empowering your family, building your wealth and defining your legacy,