Estate Planning Steps When Getting a Divorce

Brad Smith • October 7, 2020

Divorce is not easy. Not only is this process difficult in relationship to emotions, divorce requires many actions to be taken and many decisions to be made.

One of those important decisions is regarding your estate plan. It could be the plan deep in your filing cabinet that you and your current spouse executed 10 years ago or the one you never got around to signing.


Either way, it is important to review for two reasons:


  • Revising the plan immediately to prevent your future ex-spouse from inheriting or gaining control over assets if you die or become incapacitated before the divorce is final.


  • Some documents must be modified to ensure that they do not receive unintended benefits even if the divorce is final and the extinguishes your ex-spouse’s rights.


Also consider revising the will and any revocable trusts to exclude your spouse. In many states, your spouse will retain elective share or community property rights to a portion of your estate until the marriage ends. But when you revise those documents, it will limit your spouse if your pass away before the divorce is final.

Changes to the Estate Plan

There are other aspects that you must look into when going through a divorce:


  • Update your health care decisions. If you are in a car accident and end up in the ICU, who will make health care decisions for you? Chances are you have your spouse as the decision maker if you are unable to, which may not be what you want when you are in the midst of a divorce.


  • Change your power of attorney. If it is a durable power of attorney, it gave your spouse access to all of your accounts and assets now while you are competent. This includes access to assets in your name alone. This should concern you, particularly if the divorce is not amicable. You need to revoke that power of attorney, execute a new one and possibly provide notice to your current spouse of the revocation.


  • Find out what you can and cannot alter. In most states, you will not be able to change the beneficiary designation of life insurance, retirement accounts or plans (like your 401k), and pensions during the divorce. Those designations often must to stay in place until the divorce is final.


  • Update your will. If you are able to execute a new will, you should do so. If you do not want your current spouse in charge of your estate, it is best to remove him or her as executor. You most likely will not be able to prevent your current spouse from being the guardian of your children if you pass away, unless he or she is determined by the court to be unfit; however, you can certainly name an alternate guardian.


  • Decide what to leave your spouse. In most states you cannot disinherit your spouse completely. If you did, he would have the right to contest the will and receive a certain percentage of your assets. Often clients will leave the spouse only what he or she is entitled to receive. This is easy and clean approach. Other clients take a more aggressive approach and disinherit him knowing that he will contest. They want to see their spouse have to fight for the money. The choice is all yours.


  • Look at your prenuptial (or postnuptial) agreement. Make sure you also look at this document to see what your spouse is entitled to in the event of your death. Your new estate plan should be consistent with the terms of your prenuptial agreement.


  • Amend your trust. If you are able to amend your revocable trust, do so immediately. As with the will, the key issue is what assets to leave your spouse. If there are gifts for the other family, you may want to remove those. A large issue to consider is trust provisions for young children. Do you want your spouse managing and having access to monies for your children? If you have minor children, you should have a revocable trust that will name someone of your choosing as trustee. Otherwise, if your spouse is their guardian, they will have the right to access and control your money for them if you die.


  • Revisit the plan after the divorce is finalized. Estate planning during divorce is often a temporary measure. Once the divorce is finalized, you must revisit your estate plan and see what needs to be updated in light of the divorce. Also, do not overlook those beneficiary designations. I often come across estates of people who die never having updated their beneficiary designations. Their ex-spouse is still named to inherit the assets. This can result in litigation and serious unintended consequences.

Other Aspects to Consider

Other aspects to consider are changes to beneficiary designations in IRAs, life insurance policies, annuities or retirement plans (note that federal law prevents you from removing your spouse as beneficiary of a retirement plan, without his or her consent, until the divorce is final). You should also revise payable on death (POD) or transfer on death (TOD) designations in bank or brokerage accounts.

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