A divorce is an emotionally draining, frustrating and exhausting time. The last thing anyone wants to think about is more legal paperwork. However, a divorce is one of those life changes when an examination of your estate plan is especially important. It is a time that requires either an update or a whole new estate plan to avoid unintended consequences for you and your family.
Discuss Potential Changes to Your Estate Plan with Your Spouse Before Filing for Divorce
In general, once you file for a divorce you will be bound by a temporary restraining order, which may limit your ability to modify your estate plan or make major financial changes until the divorce is complete. While it may not always be possible to have an open conversation with your spouse about estate planning before you file a divorce, it is still a good idea to have discussion with your spouse, and attorney, about potential changes or modifications to your estate plan, or a revocation of your existing wills before or during your divorce.
Before your Divorce is Finalized
First, it is very important to keep in mind that you are not legally divorced until the judge signs the final decree. The process of actually getting a divorce can take several months or even years before it is finalized. In the meantime, unless you have updated your estate planning documents, your soon to be ex-spouse could still inherit from your estate; or in the event of an accident or a major health issue, your soon to be ex-spouse may able to continue to make financial or health care decisions on your behalf.
Update, or Execute New Health Care Documents
A health care power of attorney allows you to appoint another individual to make your health care decisions in the event that you are unable to do so for yourself. Within the process of your divorce it is important to make sure that your health care power of attorney is updated so that your soon to be ex-spouse no longer has the ability to make health care decisions on your behalf. If you do not already have a health care power of attorney in place consider executing one to make clear you do not want your former spouse to have any input into decisions and that your important health care decisions will be provided for by the person you choose.
Update Your Financial Power of Attorney
If you had executed a Durable Power of Attorney for financial decisions, which appoints your soon to be ex-spouse as your agent you may want to immediately revoke it and execute a new power of attorney. A Durable Power of Attorney for financial decisions gives the individual of your choosing an immediate and present power to sign documents on your behalf, access to bank accounts and all other financial powers. While an automatic temporary restraining order will likely be in place during your divorce, it is still important that your power of attorney is updated or revoked to avoid any unintended consequences.
After Your Divorce is Finalized
If you have already been through the divorce process and are ready to move on with your new life now is the time for a new estate plan. While in Montana any nominations of the former spouse, or distributions to a former spouse, are automatically revoked after a divorce, this default can provide for some odd and unintended consequences. A new estate plan enables you to be in control of what happens to your property upon your death or incapacity. Estate planning is also the process by which you appoint who you want to be responsible for carrying out your wishes for your assets, as well as your family, financial, and heath care decisions.
Create a New Estate Plan
At a minimum your estate plan should include a Last Will & Testament, Power of Attorney for Financial Decisions, Power of Attorney for Health Care Decisions, and a Living Will. Even if you are not quite ready to execute a comprehensive estate plan, it is critical to at least have a minimal will, which appoints your personal representative and sets out your plan of distribution. In addition, durable powers of attorney for health care and financial decisions allow youto be in control of your life in the event of a disability or incapacity. These documents allow your life to carry on during a disability; your bills will be paid and your care will be provided for by the person you choose.
Review & Update Beneficiary Designations
After a divorce, updating your beneficiaries is especially important. The last thing you want your family to have to deal with is removing a former spouse or other unintended beneficiary after you are gone. Work with your financial planner, or check with your specific financial institution on how to make and update beneficiary changes.
Plan For Your Children
While you may not be able to control all aspects of planning for your children after a divorce, you can decide what assets your children will inherit from your estate and how and when they will receive funds from your estate. For younger children, you may consider setting up a trust for their inheritance wherein a trustee of your choice will manage funds for your children until they reach the age of majority. This allows you to control how your children will receive these funds and provides for financial management of your estate separate from your former spouse.
Don’t Procrastinate
After a divorce you likely feel like you have had enough paperwork and attorneys to last your lifetime, but do not put off updating your estate plan. Discuss your thoughts and concerns with an estate planning attorney to ensure that your estate plan reflects your current situation and ensures that you and your loved ones are protected and prepared.