In this edition of Ask General Counsel, we discuss what happens to your estate plan (and what you should do) when you are getting divorced.
Ask General Counsel is a bi-monthly legal column by General Counsel, PC, a law firm based in McLean that represents businesses, nonprofits and individuals throughout the Washington area (and beyond). For more information, visit www.gcpc.com.
Getting divorced can be overwhelming. Naturally, people may worry about finances, children and where to live. You probably already know how to get a family law attorney involved to assist you through the divorce process, but you may not realize that this is a good time to reach out to your estate planning attorney as well.
If you already had an estate plan in place while married, your spouse was probably the beneficiary of much of your estate. What happens while you’re separated? What happens after your divorce? What happens to your assets if you don’t update your last will, revocable living trust or advanced healthcare directive?
What Effect Does Divorce Have on a Will?
Many states, including Virginia, Maryland and the District of Columbia have statutes that automatically revoke a bequest in legal documents to a former spouse upon divorce. However, not all states do this in the same way, and some states will revoke the whole will upon divorce, requiring a completely new will to be executed. Others will just revoke the specific portions of legal documents leaving assets to the former spouse and, without a new plan, those assets will flow to the residuary estate to be distributed according to the will (which may also name the former spouse, in which case those assets will pass through probate intestate and according to state statute).
If you pass after your divorce is finalized, but before you update your estate plan, it’s possible that your estate plan won’t adequately distribute your assets once provisions involving your former spouse are revoked. If this happens, the government decides how your property is passed according to state law — regardless of your wishes.
It’s important to keep in mind that for many of the states that do automatically revoke portions of the will upon divorce, that revocation does not take effect until the marriage is officially dissolved, meaning the will is still enforced while the couple is only separated. If you should die before a divorce is finalized, it’s likely that the majority of your assets will pass to your former spouse in probate if that is what your original estate plan dictated.
What Effect Does Divorce Have on Other Aspects of an Estate Plan?
A comprehensive estate plan includes more than just a will, and those other pieces, such as insurance policies, retirement plans or brokerage accounts, should have beneficiary designations updated during a divorce. Depending on the state, divorce does not automatically revoke provisions related to a former spouse in a trust or beneficiary designation, such as a retirement account or life insurance policy.
If you have a trust that names your former spouse as trustee, that should also be updated. All aspects of an estate plan, including a will, trust, power of attorney, beneficiary designations on accounts, and health care directives should be updated.
Additionally, what happens to jointly owned property, such as your shared home? Often, jointly owned property will be awarded to one spouse in a divorce or as agreed by the parties in a separation agreement. However, if the property is still jointly owned after the divorce, it’s often best to consult with your attorney to determine the options available to sever the joint tenancy and leave one spouse (or neither in the event of a sale) to own the asset.
In addition to working with your family law attorney, it’s critical to consult with an estate planning attorney if you’re considering a divorce, already in the process of a divorce, or previously divorced and haven’t yet updated your plans. An estate planning attorney will make sure that all aspects of your plan are considered and updated so that your former spouse is not still listed as a beneficiary of assets or decision-maker over financial affairs or medical issues.
Additionally, timing is important. Some states require certain changes to be made after a divorce is finalized and a separation agreement is executed, while other matters can be updated while a couple is separated. Either way, an experienced estate planning attorney can also help you take action with a new estate plan to structure assets and draft new legal documents to avoid the probate process should anything unfortunate occur.
An experienced estate planning attorney will know what needs to happen when and can ensure that the process goes smoothly, and nothing is overlooked. While your attorney can make sure you have a comprehensive list of things to be addressed, most people should make sure they address the following issues during or after a divorce:
- Execute a new will or revocable trust or amend previous will or revocable trust
- Create new advance health care directive or living will to address your medical care
- Update beneficiary designations for life insurance policies, retirement accounts and other financial accounts
- Revoke existing power of attorney, if applicable, and execute new durable power of attorney
- Consider any remaining assets, such as jointly held real estate and bank accounts
After a divorce, you should also consider guardianship if you have minor children, especially when there are considerations for children with special needs. While your former spouse may take full custody in the event something happens to you, that may not always be the best decision, and these decisions may be better off being made by your family members or other close friends. It’s important to make sure that plans for your children are in place.
Contact Us – An experienced estate planning attorney can help you prepare and guide you through the process of updating your estate plan after or during a divorce. Estate planning attorneys at the law firm of General Counsel, PC can guarantee that you’ll feel more confident about your future after you’ve made your estate plan or updated your existing plan.
We would welcome the opportunity to help you navigate the estate planning process, review your existing will, revocable living trust, or financial power of attorney to explain the provisions you have now, and outline any gaps or updates that could afford the protections you may desire. given the change in relationship status.
Contact us today at 571-396-8460, email email@example.com, or if you’re ready to commit to protecting yourself and your loved ones, reach out and schedule an appointment to have a conversation about how we can help!