Some marriages end in noise and pain. Other marriages drift away quietly with the signing of documents and only a hint of acrimony.
Planning an estate in the aftermath of a divorce involves learning a different type of arithmetic. Without a spouse to anchor an estate plan, the executors, trustees, guardians or agents under a power of attorney and health care proxies will have to be selected from a more diverse pool of people that are connected to you.
Beneficiary forms tied to an IRA, 401(k), 403(b) and life insurance must be updated to reflect the dissolution of the marriage. Paperwork marks the end of one life and the beginning of another.
Estate provisions are usually included in agreements that are created during the separation and divorce. These provisions may call for the removal of both spouses from each other’s estate planning documents and retirement accounts. In New York, bequests to an ex-spouse in a will prepared during the marriage are voided following the divorce. Even though the old will remains valid, a new will has the benefit of realigning your estate assets and matching them with the right people.
Trusts made during the marriage are governed differently. Revocable trusts can be revoked and the assets held by those trusts can be part of the divorce. Irrevocable trusts involving marital property are less likely to be broken up. In fact, following the death of the grantor, distributions may be made to an ex-spouse as directed by the irrevocable trust.
A major part of post-divorce estate planning is changing beneficiaries. Request change of beneficiary forms for all retirement accounts – IRA, 401(k), 403(b) – and life insurance policies. Without a stipulation in the divorce decree terminating their interest, an ex-spouse still listed as beneficiary of an IRA or life insurance policy could lead to problems upon your death.
Divorce pushes children into positions of responsibility at an earlier age. Adult children in their 20s or early 30s take the place of the ex-spouse as fiduciaries and health care proxies. This includes agents under powers of attorney, executors and trustees. For divorcing parents with minor children, selecting guardians under a will to care for the children should both parents pass away may involve more delicate negotiations between the parties to achieve a consensus.
Trusts are often the preferred estate planning vehicle for divorced partners. Their assets pass outside of probate, which can be helpful in situations where the divorce’s impact was felt by the children and led to internal strife. Trusts are also useful when a divorced partner is contemplating remarriage, but wants to protect the estate legacy left to children from the first marriage.
Once the whirlwind of emotions surrounding a divorce begins to subside, a few clear-headed estate planning tasks will mark a new chapter in a family’s history.