Divorce is stressful, and if you’re considering a marital split, the last thing you’re probably focusing on is your estate planning documents. But if you’re thinking of getting divorced, it’s usually wise to revise your estate plans now rather than later.
- You might have signed a power of attorney document that allows your current spouse to make gifts, sign contracts, and make financial decisions for you.
- You might have a life insurance policy that names your spouse as the beneficiary.
- You might have a lot of your money in joint accounts to which your spouse has unlimited access.
- You might have a health care proxy that allows your spouse to make medical decisions for you if you become incapacitated.
In each of these cases, this might be a good time to give some additional thought to your arrangements.
In addition, it’s a good idea to revise your will. You may have heard that in many states, if you get divorced, any bequest to your spouse will automatically be cancelled. That’s true in some places – but even where it’s true, there are several problems with relying on this fact alone.
First, divorce is a lengthy process, and there’s a small chance that something could happen to you before your divorce is final. (No one wants to think about this, of course, but estate planning is all about planning for the unthinkable.)
In a case in New Mexico, a man who had filed for divorce died unexpectedly before his divorce decree had been finalized. He hadn’t gotten around to updating his will, which benefited his wife.
The man’s son was appointed his executor. The son asked that a court issue a final divorce decree, which would revoke the man’s bequests to his wife.
But the court said that the bequests couldn’t be revoked in this situation – and therefore the wife was entitled to collect the man’s assets under his will.
A second problem is that even if a divorce cancels out any bequests to your spouse in your will, it doesn’t determine what will happen instead.
You still need to revise your will to decide what will happen to your property. And you might want to review this carefully with your attorney, because the rules for taxes, trusts and so on can be very different for single people than for married people.
Finally, you’ll want to review the beneficiaries of other accounts you may have – including IRAs, 401(k)s, pension plans, transfer-on-death accounts, etc. Remember, even if a state law says that a divorce cancels out your bequests in a will, it doesn’t necessarily cancel out your beneficiary designations on these types of accounts.