Importance of Updating Estate Plan Post Divorce
The divorce process can be lengthy and emotionally consuming, especially during the challenges of a global pandemic. However, even in these unprecedented times, it remains important to update your estate plan once the divorce or annulment is finalized by the court. This is especially vital if you have children or different views on legacy than your former spouse.
If you created your estate plan while married or in contemplation of marriage, it is more than likely that your documents reflect your former spouse as the primary beneficiary of property and the primary agent or fiduciary who can act on your behalf. Sometimes, updating your estate plan is overlooked post-divorce because it is assumed that the dissolution automatically removes your former spouse from all estate planning considerations. This is not always the case. Below are items to review regarding your estate planning post-dissolution:
· Asset Review: One of the first things to consider post-dissolution is to create an updated list of your assets and liabilities. Because a divorce divides property, your current estate planning documents may refer to joint assets that you no longer have an interest in, or joint liabilities that may not be your obligation going forward. It is important to have a clear picture of your separate assets and separate liabilities so estate planning documents can accurately reflect your new situation. Your financial advisor, accountant, or attorney can assist with this process if necessary, but your decree should provide a thorough overview of property.
· Last Will: Idaho Code 15-2-508 provides that a divorce or annulment revokes any disposition of property made in the Will to your former spouse. This means that after a divorce or annulment, your former spouse will not receive property even if he or she is listed as the primary beneficiary of your estate. If your former spouse is listed as your trustee, personal representative, or guardian, this law also revokes such nomination. However, if you have a decree of legal separation (as opposed to a decree of divorce), your spouse will still be treated as your husband or wife and will not be excluded. Idaho Code 15-2-508 does not revoke your Will or remove provisions that refer to your former spouse but treats your former spouse as if he or she predeceased you. While this may provide some relief or comfort, it can also lead to significant confusion regarding your intended beneficiaries which could end in serious conflict or even litigation. It is therefore recommended to simply update the entirety of your Will to avoid potential disputes with property distribution. Similarly, if your intent is to keep your former spouse as a beneficiary of property under your Will or serve in a nominated role, you should also amend your Will to clarify this desire to include your former spouse post dissolution.
· Fiduciary Designations: Your fiduciary, or agent, is someone you have nominated to act on your behalf in the event you are unable to do so. Typically, this individual is nominated using a General Power of Attorney for property and financial matters, and a Durable Power of Attorney for Healthcare. If these documents were finalized while you were married or in contemplation of marriage, it is more than likely that your former spouse is nominated as the first choice for your agent. It is important to review and revise these documents to remove your former spouse after divorce.
· Beneficiary Designations: While the divorce decree typically deals with assets such as retirement accounts and life insurance policies, it is important to review and update beneficiary designations on these accounts. Again, if these accounts were opened or maintained during marriage, your spouse is likely listed as your primary beneficiary. Unless your divorce decree provides otherwise, beneficiary designations should be updated. Simply updating your estate planning documents will not affect the beneficiary designations on these accounts and further action is required by you. Additionally, Idaho Code 15-2-804 addresses this issue and lays out certain exceptions which may be applicable depending on the situation.
While there are some safeguards in place to remove former spouses from estate planning documents, they are not foolproof and could still result in your former spouse receiving some of your estate. It is therefore important to make sure your estate plan accurately reflects these updates after divorce.
This article is not intended to replace legal advice applicable to your situation and should be used only for informational purposes. Consult with your legal or financial advisors regarding the suggestions contained herein. Ms. Mignella is an attorney with the firm of Sandra L. Clapp & Associates, P.A., and can be reached at firstname.lastname@example.org or (208) 938-2660.