Many people create wills, trusts, and other estate planning documents while married, often naming their spouse as a primary beneficiary or decision-maker. However, divorce can have a major impact on your estate plan, and failing to update it can lead to unintended consequences.
Here is what you need to know about how divorce affects your estate planning documents and what steps you should take to protect your wishes.
Wills and Trusts
In most states, divorce automatically revokes any provisions in a will or trust that favor a former spouse. This means that if you named your ex-spouse as a beneficiary or executor in your will, they may no longer be entitled to inherit from your estate or manage your affairs after your death.
Even so, it is important not to rely solely on state law. You should create a new will or trust after your divorce is finalized to ensure your wishes are clearly stated and enforceable. Without updated documents, there can be confusion, legal challenges, or unwanted distributions of your assets.
Beneficiary Designations
Not all assets pass through your will. Life insurance policies, retirement accounts, and certain financial accounts transfer based on beneficiary designations. These designations are separate from your will and must be updated individually.
Many people forget to change these documents after a divorce. As a result, an ex-spouse could still legally receive benefits from a life insurance policy or retirement account, even if that was not your intent. Reviewing and updating all beneficiary designations is a critical step.
Powers of Attorney and Healthcare Directives
During marriage, it is common to name a spouse as your agent under a power of attorney or healthcare directive. This gives them the authority to make financial or medical decisions on your behalf if you become incapacitated.
After divorce, most people no longer want their ex-spouse to hold this power. Updating your powers of attorney and healthcare directives ensures that someone you trust will manage your affairs if needed.
Guardianship of Minor Children
If you have minor children, divorce can also affect guardianship plans. While the surviving parent is usually the default guardian if one parent passes away, estate planning allows you to express your wishes regarding guardianship if both parents are unavailable.
After a divorce, it is important to review and update your guardianship nominations to reflect any changes in your family dynamics or preferences.
Divorce changes many aspects of your life, and your estate plan should change with it. Reviewing and updating your documents as soon as possible can help you avoid unintended outcomes and ensure that your assets and decisions are handled according to your current wishes.
