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A divorce will change many aspects of your life, and your estate plan is no exception.  If you created an estate plan while you were married, your ex-spouse is probably deeply entangled in that plan. The process of disentangling your “ex” is an important one.  To start this process, it would be best to consult with an attorney who can help you navigate the various obstacles that may arise from this process.

In this article, we will highlight some of the ways in which a divorce can impact your estate plan.  By working with an estate planning attorney, you should be able to address all of these issues and create an estate plan that works best for you as you begin this next chapter.

Naming New Beneficiaries

If you created an estate plan during your marriage, then your ex-spouse is likely a significant beneficiary.  At the time, you likely shared some or all of your assets.  Your estate plan probably reflects this former reality. 

The process of removing a beneficiary from your will can be accomplished either through a codicil or by creating a new will altogether.  A codicil is an additional document that is executed after the will, but in the same way as the will, and is then attached to the original will.  If you’re just making one or two minor changes to your will, a codicil may be the way to go. But as we’ll address below, recently divorced individuals typically need to alter enough in their plan that it justifies creating a new plan altogether. In addition, many attorneys are hesitant to create codicils that modify another attorney’s work, as it forces them to vouch for the work of someone else. Furthermore, a last will that is loaded with changes and amendments can create ambiguity that can ultimately lead to an estate dispute.

To name new beneficiaries, it may be best to create a new estate plan altogether. This can solve multiple problems without the same downsides that codicils create. By creating a new estate plan, you can alter everything that needs to be changed and then execute the new documents, ensuring a presumed level of validity.   

Creating a new estate plan altogether allows you a clean slate. You can easily reflect your new wishes in the new documents.  There will be no evidence of changes and therefore no skepticism on the part of your heirs or the courts.  The new estate plan can name the correct beneficiaries and executor, as well as eliminate any other areas of your estate plan where your ex-spouse may have been prevalent.  

Beyond that, many newly divorced individuals find that their priorities have changed and their goals for their estate plan have changed alongside them. This can be with regard to healthcare treatments, keeping your children’s inheritance out of the hands of your ex, or a number of other factors that are specific to your personal circumstances.

Reassigning Powers of Attorney

Powers of attorney are integral parts of any well-rounded estate plan.  A durable power of attorney for finances allows a named person to temporarily manage your finances for you in the event of hospitalization, incapacity, or unavailability.  A durable power of attorney for health care allows a named person to make medical decisions on your behalf in the event you are unable to do so yourself, namely in the event of incapacity or unconsciousness.  If you created these documents during your marriage, then your ex-spouse may be named as an agent on these documents.

Someone who holds power of attorney, either for finances or health care, holds immense power over the principal who created these documents.  In order to sufficiently revoke their power, you must submit written notice to the person from whom you seek to revoke the power.  You must also provide notice to any financial institutions, banks, or any other establishment that may rely on your old powers of attorney.  However, depending on how your power of attorney was drafted, it may automatically remove your ex-spouse as agent upon the dissolution of the marriage.

The revocation of the old powers of attorney is only half of the process here.  It is equally important that you execute new power of attorney documents to ensure that someone else can act on your behalf.  While you likely do not want that person to be your ex-spouse, it is vitally important that you choose someone who you trust to make decisions with your best interest in mind. 

By revoking the old documents, and creating new ones, your safety net will be whole again, and you can be certain that your ex-spouse does not hold these powers over you.

Restricting Your Control Over Assets

Whether through a prenup, post-nup, or property settlement agreement (PSA), your marriage and ultimate divorce may have imposed some contractual restrictions on your control over certain assets.  These contracts may restrict your ability to control or dole out certain assets.  For example, a PSA may split up the assets that you and your ex-spouse shared during your marriage.  This can be very impactful for your estate plan because perhaps the two of you have three cars.  The third car is a new sports car that you both own equally.  Your will states that your longtime best friend shall inherit the car after you pass.  If the PSA states that your ex-spouse gets that car, you will need to make that adjustment to your estate plan.

In other words, your will may have distributed assets that your PSA has since given to your other spouse.  Since you no longer have a right to that asset, you can no longer give it away in your will.  These changes will need to be properly accounted for in your post-divorce will.  Since these marital agreements can have a far-reaching effect that impacts many assets, it may be best to create a new estate plan altogether.  This web can be deeply entangled.  In many cases, it is likely easier to start from scratch and create new documents rather than making several changes to each individual document.

Guardianship

Determining the guardian for your child in the event you become unable to care for them can become immensely confusing.  When a divorced parent passes, the court will naturally look to the surviving parent to assume custody.  If the surviving parent is capable of caring for the child, then they will take the child in.

In cases where a divorced parent has sole custody of the child because the other parent is unfit or otherwise unavailable, if the custody-having parent passes, the court may look elsewhere to name a guardian.  If the parent has sole-custody because the other parent is involved in criminal activity, has a history of drug abuse, or other indiscretions that have led the court to see that parent as “clearly unfit,” then the court will not give that parent custody of the child.  Instead, the court would appoint someone who they believe is fit for the role.  

Another major issue that can arise is when parents divorce, they are unlikely to choose the same person to be the guardian for the child in their absence.  If both parents were to pass, and both had someone different named as the guardian of the child, the final decision would fall to the court.  This could result in a lengthy legal battle that could cause even more instability and trauma for the child.  

Do I Need a Trust?

A revocable living trust is a way of distributing one’s assets.  The creator of the trust will fund the trust with the assets they intend to give away upon their passing.  A living trust allows the creator to implement certain conditions and timeframes upon which the assets are to be inherited.  The trust will also name a trustee who is responsible for carrying out the trust’s wishes.   The trustee will also supervise the inheritance of young children, and even young adults, making sure the assets are used for proper expenses.  

A divorce can increase the need for a revocable living trust because, if one divorced parent passes, the court will usually give great deference to the surviving parent when deciding the child’s new guardian. What this means is that if your ex-spouse is given sole custody of the child, the ex-spouse would be the one using the child’s inheritance for child care expenses.  

With a revocable living trust, you can name a trustee whose job it will be to oversee the assets and make sure they are spent properly.  The trustee would monitor the child’s inheritance because children under the age of 18 cannot legally inherit property.  Further conditions in the trust can delay the child’s inheritance for even longer but that is up to the creator of the trust.  You could set the conditions for the child to inherit outright at 25 years old, 30 years old, when they graduate from college, or whatever you may want the condition to be.

Before the child is allowed to inherit, the trustee will be tasked with approving or denying the guardian’s request for money.  The trustee has a legal obligation to approve the reasonable requests while denying unreasonable ones.  

This can be beneficial because a neutral third-party, the trustee, may offer an unbiased perspective to judge whether particular expenses are genuinely necessary for child care.  For example, if the guardian requests $300 on clothes for the child at the start of the school year, that is an expense that the trustee would likely have an obligation to approve.  However, the trustee could stop the ex-spouse from using the child’s inheritance to buy a Mercedes-Benz to “drive the child to school” since that is excessive and unnecessary.  The trustee can act as a safety net to ensure the child’s inheritance is used properly for their care until the child reaches the age of inheritance.

Where to Go From Here?

If you are recently divorced, or have been divorced for a while but have not yet gotten around to creating your new estate plan, then now is the time to get the process started.  A divorce will require a complete facelift for most estate plans.  From changing the beneficiary structure, to naming a new executor, to re-choosing powers of attorney, there are any number of updates that may need to be made for your new estate plan.  

The best place to start is by speaking with an estate planning attorney who can help you create a plan that effectively revokes all of the benefits your ex-spouse stood to gain.  At Rosenblum Law, our knowledgeable estate planning team can navigate the changing circumstances, helping you create the optimal plan.  For a free, no obligation consultation, call us at 888-235-9021.