Does Divorce Have an Impact on Estate Planning?
When navigating a divorce, estate planning often takes a backseat to immediate concerns. However, even amicable divorces require careful attention to your estate plan to prevent long-term complications and unwanted outcomes after your death.
Last Will and Testament
If you lack a will, creating one becomes essential during divorce proceedings. Should unexpected circumstances arise—such as death during the divorce process—your designated beneficiaries will receive your assets as intended, rather than following state intestacy laws.
For those with existing wills, review the provisions carefully. If your current will designates your soon-to-be ex-spouse as the primary beneficiary, updates are necessary. State laws vary in how they handle assets in wills, making it critical to consult with an estate planning attorney and update your will to reflect your changed marital status, ideally before the divorce is finalized.
Trusts
Review trust arrangements and remove your ex-spouse as trustee if applicable. If you lack a trust but have minor children or other heirs, establishing a trust may be worthwhile.
A Domestic Asset Protection Trust (DAPT) can transfer assets to a trustee for minor children’s benefit, keeping these assets outside marital property division. However, DAPTs are irrevocable—once created and funded, you cannot access the assets.
Review Insurance Policies
Remove your spouse from all insurance policies, particularly life insurance. If you share custody of children, court orders may require maintaining your ex as a beneficiary on life insurance policies. Additionally, arrange independent health insurance coverage if you previously relied on your spouse’s employer plan.
Power of Attorney
If your spouse holds financial or healthcare power of attorney authority, written notification must be provided. Changes to these designations require formal written documentation using your state’s specific legal language—an estate planning attorney can ensure proper execution. Notify all relevant parties, including financial institutions and healthcare providers who regularly interact with your current power of attorney.
Divide Retirement Accounts
The division of retirement accounts depends on account type and when earnings were received. Courts must issue a Qualified Domestic Relations Order (QDRO) before splitting defined contribution plans like 401(k)s, 403(b)s, and ERISA-governed plans. The judge’s signature on this document allows plan administrators to enforce the division.
Conclusion
While divorce creates substantial stress, integrating estate planning into this process prevents future complications and protects your interests long after the divorce concludes.
If you or a loved one needs assistance with estate planning during or after a divorce, do not hesitate to contact The Stegall Law Firm to schedule a consultation. We are here to help.
