While some may wait until after their divorce is final, there are some steps that should be in play before to protect yourself and your family even if they can’t be formalized until a later date. It is important to re-evaluation of your wills, trusts, health care proxies, and powers of attorney.
When to Revise
Your inclination might be to wait until your divorce has concluded to revise all of your estate documents, but because a high net worth divorce can take months to years to conclude, it absolutely makes sense to meet with your estate attorney as soon as you are considering divorce.
Even though you file for divorce, you remain legally married while the case is ongoing. In most situations, all of your current estate plan designations remain valid until the divorce is finalized. If you die during the divorce, your spouse is still your spouse and entitled to everything as it is currently set out.
You may wish to change your will, name someone else as your health care proxy, and revoke powers of attorney, giving your spouse authority so that you have a new plan in place while the divorce is moving through the process.
It is important to be aware that you cannot completely disinherit a spouse you are legally married to under New York law. Even if you write them out of your will, state law gives them a right of election to take $50,000 or one-third of marital assets upon your death, whichever is larger. Your estate planning attorney can provide various options to reduce this election (including the use of trusts that remove assets from your estate).
The Effect of Divorce on Your Will
Many people have wills in which they leave all or most of their estate to their spouse. If you get a divorce and do not change your will, New York state law will invalidate that provision in your will. If you die and have not changed your will and it still includes a bequest to your spouse, that provision is not valid.
The problem with this is that if a bequest to your spouse is invalidated, New York then treats the situation as if your spouse predeceased you. Depending on how the will is written, those assets might go to alternate beneficiaries. If no alternate is named and the will does not have a residuary clause (a catch-all clause for any property not named or distributed elsewhere in the will), the assets may then be distributed according to New York state’s intestacy statute that automatically determines how an estate is distributed if someone dies without a will. Because you want to control how your estate is distributed, you should not rely on this automatic process and instead, immediately have your will re-drafted with your own wishes in place.
Additionally, many people name their spouse as their executor in their will. New York state law also revokes any nomination of your spouse as executor after your death, but, again, the situation is treated as if the spouse predeceased you, so unless you have an alternate executor named, the court will have to intervene. It is better to have a new will drafted choosing a new executor and alternate executor after your divorce.
In reviewing your will, you may also wish to reconsider bequests made to your former spouse’s children from previous relationships, as well as your former in-laws. These are not automatically revoked and require affirmative action to change. Similarly, nomination of your former spouse’s family members as guardians for your minor children should be reevaluated.
If your estate plan includes revocable trusts, including Totten trusts and bank account trusts, that name your spouse as a beneficiary or trustee, the divorce revokes those designations. As with your will, the document is then interpreted as if your spouse had predeceased you. While this prevents your spouse from inheriting or controlling your estate, it does not reset your estate planning. It is important to meet with your estate planning attorney to restructure all trusts to carry out your current wishes and estate planning objectives.
Health Care Proxies and Advance Directives
Your health care proxy and/or advance directive are key parts of your estate plan, and name a person to make health care decisions on your behalf if you are unable to do so. It is common to name your spouse to assume this role. If you divorce and do not change this document, New York state law automatically revokes the designation of your spouse, but as in all the other situations, it may leave you without a plan. Therefore, you will also want to have your attorney draft a new health care proxy and/or advance directive so that you can ensure you have a person ready, willing, and able to make decisions for you should you need them to.
Powers of Attorney
Power of attorney documents are frequently included in estate planning, often with spouses giving each other immediate or springing powers of attorney to handle business or financial matters for each other. If you divorce and do not revoke this document, New York state law automatically revokes your spouse as your attorney in fact in this document. Despite this, you will want to execute a new power of attorney if there is someone else you would like to have the ability to make financial decisions on your behalf.
The laws about life insurance policies after divorce depend on the type of policy. If your spouse is your beneficiary on your life insurance policy and is a revocable beneficiary, then divorce revokes that designation automatically. If your spouse is an irrevocable beneficiary (such as an irrevocable life insurance trust), divorce has no impact on the designation. It is best to review all of your life insurance policies and address beneficiaries as you work out your larger estate goals.
Pensions and Retirement Benefits
If your spouse is listed as your beneficiary on a pension or retirement benefit (including profit-sharing plans, stock bonuses, etc.), the designation is revoked, and it is treated as if the spouse predeceased you. Regardless, you should have an attorney review these plans and choose new beneficiaries that fit into your new estate plan goals.
The one big exception that has to do with estate planning and divorce is prenuptial and postnuptial agreements. If a prenuptial or postnuptial agreement specifies that the couple shall include specific bequests in their will even after a divorce, that agreement will remain controlling as long as the agreement was upheld and incorporated into the divorce decree.
Revamping and revising your estate is a process that should begin as soon as you decide to file for divorce and should be completely finalized as soon as the divorce is entered. Updating these documents will ensure that you control exactly where and how your assets are distributed after your death.