If you are going through a divorce, you are most likely focused on dividing assets, revisiting your household budget, and negotiating support and custody. It makes sense, which is why it’s easy to overlook your estate plan and the fact that you need a new will and trust.
Here is what you can (and should) do now when it comes to your new will and trust:
Most estate plans created during marriage assume that the spouse will play a central role in the event of incapacity or death. Nearly all married couples appoint their spouse as primary decision-maker for medical and financial decisions in the event of incapacity, and as trustee/executor and beneficiary upon death.
When you separate, those designations likely no longer reflect your wishes.
Who Has Authority?
In some states, a legal separation automatically ends a spouse’s authority under a power of attorney; in others, it doesn’t – so waiting until the divorce is finalized to update your documents could leave your estranged spouse with powers or benefits that you no longer intend for them to have. Also keep in mind that in many joint estate plans, couples name the same alternate decision-makers in order to avoid a situation where relatives on each side of the family attempt to take control if something happens to both spouses. So take a look at your documents—is your named alternate one of your in-laws?
Protecting Yourself While the Divorce is Pending
Certain financial changes have to wait until your divorce is finalized. For example, you usually can’t move joint accounts into your sole name or change beneficiaries on life insurance or retirement plans until your marital settlement agreement is in place. That said, there is still a lot you CAN do to protect yourself and your children in the meantime, such as:
- Updating your Advance Health Care Directive. Choose a trusted person to make medical and end-of-life decisions if you are unable to do so.
- Updating your General Durable Power of Attorney. Consider giving a trusted relative, friend, or professional fiduciary authority to access your accounts, sign legal papers, and make financial decisions on your behalf if you become incapacitated.
- Creating a New Will and, if Relevant, a (Separate Property) Trust. Although there are restrictions on moving money around and funding a new trust during divorce proceedings, you can have your estate planning attorney draft documents that ensure that any assets owned by you are distributed according to your current wishes. You can also name new executors and trustees.
Don’t Leave Your Children’s Future to Chance
Divorce proceedings or mediation can also be an ideal time for you and your soon-to-be ex to decide who your children would live with and who would manage their money if something happened to both of you – make sure that their personal and financial wellbeing is clearly reflected in writing, and include what would happen to them if neither of you is around.
The guardianship and financial support provisions of your now-separate estate plans should be consistent. The last thing your children need is to go from their parents’ custody battle into one between extended family members, all while coping with a major loss.
Your Post-Divorce Estate Plan Checkup
Once the divorce decree is issued, you should conduct a full review of your estate plan. At that time, you can update beneficiary designations on retirement accounts, life insurance, and other non-probate assets in accordance with the divorce terms, and fund your new trust with the property awarded to you.
Protecting What Comes Next
Divorce is not just about dividing property—it’s also about protecting your future. By addressing your estate plan during and after divorce, you ensure that your health care wishes are honored, your finances are secure, and your children are supported.