If you’re going through the emotional and financial turmoil of a divorce, estate planning may be the last thing on your mind. But after a divorce, you need to take steps to update your estate plan. If you don’t, then at your death your assets could be distributed in ways that you neither expect nor want—including to your ex-spouse.
Here are three steps you can take to make sure your estate plan reflects your current life and wishes.
1. Revoke your will and make a new one
Start by revoking your old will (literally tearing it up is the best way) and making a new one. If you don’t already have a will, now’s the time to make one. It isn't difficult; you can make a simple will yourself, with a good software package or online resource, or hire a lawyer. The same is true if you made a living trust while you were married.
A will is where you:
- Leave your property to the people of your choice.
- Name an executor to wrap up your estate when the time comes.
- Nominate a guardian to take care of young children if it’s ever necessary.
All of these choices may be affected by divorce. Let’s look at them one by one.
If you’re like most people, if you made a will while you were married, you left everything to your spouse—probably not the result you want now. It’s best to start fresh with a new will, naming new beneficiaries and alternate beneficiaries, who would inherit if your first choice didn’t outlive you.
In most states, if you get divorced after making a will, any gifts that your will makes to your former spouse are automatically revoked. For example, California law states that dissolution (divorce) or annulment of a marriage revokes any bequests that your will made to your former spouse. (Cal. Probate Code § 6122.) The rest of the will is not affected.
But it’s not a good idea rely on state law. Not every state has a law like California’s, and laws can change. Also, the law doesn’t take effect until you have a final decree of divorce—if you’re still in the divorce process, gifts to your spouse are still valid.
In some states, gifts to relatives of your former spouse are also revoked by divorce. For example, Arizona law revokes gifts in a will made to anyone related to your former spouse by blood, adoption, or affinity (marriage). (Ariz. Rev. Stat. § 14-2804.) If your state has such a law and your will leaves property to your former spouse’s child (your former stepchild), divorce would revoke the gift to the child.
Relying on state law also can create some uncertainty about what happens to the property you left to your former spouse, if state law revokes that provision of your will. The general rule is that the property passes as though your former spouse had died before you did. So if your will named an alternate (contingent) beneficiary for that gift, that beneficiary inherits. If you didn’t name an alternate beneficiary, but did name a “residuary beneficiary,” then that beneficiary inherits. Otherwise the property passes under state law, as if there were no will, to your closest surviving relatives.
Those potential complications underscore the importance of making a new will. That way, it will be clear about who you want to inherit, and you can name alternates as well.
Name an executor
If you don’t want your ex-spouse to inherit your property, you probably don’t want him or her in charge of your estate, either. But if you named your spouse as your executor (called your personal representative in some states), it could happen unless you make a new will.
In many states, divorce revokes the appointment of a former spouse to serve as executor of the will or trustee of a trust. The alternate executor, if you named one in your will, would serve instead. Still, don’t count on state law—in your new will, appoint a new executor and an alternate.
Name a guardian for your minor children
A key reason that many parents of young children make wills is to name a guardian, who would raise their children in the unlikely event neither parent could. If you have kids under 18, that’s probably one reason you want to make a will.
A court will appoint a guardian to care for a child only if both parents are deceased or unfit. (And courts find a parent unfit only if there is a serious and ongoing problem, such as a history of child abuse or addiction.) If you don’t want your ex-spouse to raise your children in the event of your untimely death because you don’t think he or she is a good person or a good parent, it’s probably not something you can prevent.
In your will, however, you can name whomever you choose to serve as guardian, in case both you and the other parent aren’t available. (It is, thankfully, rare for both parents to be unavailable.) If you feel strongly that the other parent shouldn’t have custody of your children, write down your reasons in a letter and attach it to your will. It will at least give the judge something to consider.
2. Update Beneficiary Designations
As important as your will is, it might now cover some of your most valuable assets. Many assets pass outside of a will, to beneficiaries named on paperwork provided by a bank or insurance company. So be sure to update your beneficiary designations for:
- Life insurance policies
- Retirement accounts such as IRAs and 401(k)s
- Pay-on-death bank accounts
- Transfer-on-death brokerage accounts
To name a new person to inherit these assets, request new documents from your bank, brokerage company, or employer, and submit them as soon as possible.
Don’t assume that state law (or even the terms of a divorce decree) will revoke any earlier designations you made naming your former spouse. Certain “qualified plans,” such as 401(k)s, pensions, and employer-provided life insurance policies, are governed by a federal law called ERISA (the Employee Retirement Income Security Act). And ERISA says that a plan administrator must turn funds over to the beneficiary named in the plan documents—no matter what state law says. So if your former spouse is still the named beneficiary, he or she will inherit unless you change the paperwork.
3. Make New Powers of Attorney
Powers of attorney—documents that give someone authority to act for you if it’s ever necessary—are a big part of an estate plan. You should have two powers of attorney: one for healthcare (medical decisions), and one for financial matters. If you already have powers of attorney that give your former spouse authority to make decisions on your behalf, revoke them and make new documents.