Getting divorced will bring major, permanent changes to many facets of your life. These changes often require taking legal action in order to protect a person’s rights and interests. A sometimes overlooked consequence of divorce is how it can affect one’s estate planning goals. You may already have an estate plan worked out, or perhaps you are considering creating one. Regardless, you need to understand how the end of your marriage will affect it. This is where SederLaw’s Estates & Trusts attorneys can provide reliable guidance.
Why Modifying an Estate Plan After Divorce is So Important
If you’re a citizen of Massachusetts with a will, a divorce automatically revokes any bequests provided in the will to your former spouse. The same basic rule applies to fiduciary appointments such as executor, trustee, or guardian.
But you still need to revise your estate plan for several critical reasons. To begin with, the divorce may not affect other estate documents, such as a healthcare power of attorney, by which you have designated your ex-spouse to be an agent or representative. If you have any of the following estate planning documents with your former husband or wife named in some capacity, you need to talk with an attorney about revising them:
- Durable or non-durable power of attorney
- Healthcare power of attorney
- Health care proxy
Your divorce may also affect your estate planning instruments in other ways. For instance, as part of the divorce process, spouses have to divide their marital property. After doing so, you may no longer own certain assets that you intended to use to fund a revocable or irrevocable trust. You will then need to fund the trust with your own assets.
Although your ex-spouse will automatically be removed from your will, don’t wait for the divorce to accomplish this change for you. For various reasons, your divorce may take much longer than you had originally anticipated. This could cause serious unintended consequences. If you were to pass away before the divorce is concluded, for example, your estate assets may be distributed to your ex-spouse. Executing a new will and revising your overall estate plan is the best way to not only remove your ex-spouse but to ensure your desired beneficiaries collect from your estate upon your death.
Naming A New Guardian
At the time you created your will, you may have named your ex-spouse as the guardian of your child in the event you die. As mentioned above, the divorce will automatically remove your former husband or wife as the child’s guardian. You should therefore name a new person to serve as guardian if you pass away.
How Life Insurance May Be Affected
Another reason to modify your estate plan is that your divorce will not affect property transfers that occur outside of the probate context. A classic example is life insurance. If you have your former spouse named as a beneficiary of your life insurance policy, you may need to take steps to remove your ex-husband or ex-wife.
Massachusetts provides that divorce automatically removes an ex-spouse from a life insurance beneficiary designation. But federal law can complicate this. If the policyholder has a group life insurance policy through his or her employer, that policy is governed by ERISA (The Employee Retirement Income Security Act). Under ERISA, the divorce does not change who the named beneficiary is. Ask your divorce attorney about how best to handle your life insurance policy in the wake of your divorce.
Also, Massachusetts law does not allow spouses to change their insurance beneficiary designations while the divorce is still pending. There’s a good reason for this rule: life insurance benefits need to be negotiated between spouses during their divorce proceedings. As an example, one spouse may agree to keep the other spouse as a life insurance beneficiary in exchange for some other marital asset.
Life insurance also plays a key role in alimony and child support proceedings. The judge may require you to maintain a life insurance policy to insure that these support payments continue if you die. You might even be ordered to acquire a life insurance policy if you don’t already have one.
Because of the various rules surrounding this important aspect of your estate plan, you should speak with an experienced attorney before making changes to your life insurance policy.
Retirement Accounts and Your Divorce
The Massachusetts automatic revocation provision does not apply to retirement accounts such as 401(k)s and those that fall under federal rules like ERISA. Therefore, if you have your ex-spouse named as a beneficiary to your retirement accounts, you will need to change this after your divorce. As with insurance, however, you need to be careful when you make changes to your policy. You should wait until the divorce is finalized so that any revisions you make are in line with the court’s order.
Contact Our Worcester Estate Planning and Divorce Attorney
Divorce is complicated enough without the added stress of wondering how to restructure your estate plan. At SederLaw, we take a multidisciplinary approach to representing clients. When it comes to divorce and your estate plan, therefore, we turn to other attorneys in our firm who practice in related areas such as family law. If divorce is in your near future and you’re concerned about how it will impact your estate plan, connect with our Estates & Trusts team. Call us today.