It’s advisable to review and update your estate plan with any change in personal circumstances, financial circumstances, changes in the law, or just the passage of an extended time. But if you’re in the midst of a divorce, or contemplating one, this may be the furthest thing from your mind. Here are a few key reasons why you should make updating your estate plan a top priority:
Divorce can take a while. Divorce proceedings often take many months, and you wouldn’t want your soon-to-be-ex-spouse benefitting from or having any rights with respect to your estate if you were to die in the meantime. While beneficiary designations for certain assets cannot be changed once a divorce proceeding is filed, you may be able to update documents like a Will, Trust, Durable Power of Attorney, and Health Care Proxy at any time, whether or not your divorce is finalized.
Your estate plan may no longer reflect your wishes. In Massachusetts, a final divorce automatically revokes any beneficial provisions for and fiduciary appointment of your former spouse (or his/her family members) in documents like your Will and Trust, but leaves the rest of these documents in-tact. The “back-up” individuals named in your estate plan will now be first in line to receive your property at your death, but they may not be your first choice.
It’s also important to note that if your former spouse is designated as the beneficiary of your life insurance or retirement plan, Courts have found that these designations may not be revoked by a divorce. These may be substantial assets in your estate, the disposition of which is often not controlled by a Will or Trust. Once your divorce is final, you will likely want to remove your ex as a beneficiary of these assets (unless your divorce agreement requires otherwise).
Your fiduciary appointments may need updating. After such a significant change in your personal circumstances, it’s worth reconsidering who you trust with various fiduciary roles that fall under the umbrella of your estate plan. Your divorce automatically revokes any nomination of your former spouse (and his/her family members), and you’ll want to think about who should serve in these important roles:
- Personal Representative (named in your Will) to administer your estate following your death.
- Trustee (appointed in your Trust) to manage and administer trust assets.
- Attorney-in-Fact (nominated by a Durable Power of Attorney) to make financial and property decisions on your behalf.
- Health Care Agent (nominated by a Health Care Proxy) to make medical decisions on your behalf if you are unable to do so.
Stale documents could lead to confusion or litigation. Any person or entity relying on documents that nominate your former spouse may not be aware of your divorce. To avoid any potential for confusion, you should update critical documents like your Durable Power of Attorney and Health Care Proxy and provide updated copies to banking institutions and health care providers who may have old copies on file.
Also consider what could happen if you were to die post-divorce without having updated your Will or Trust. Family members and friends may come forward to dispute that the outdated documents reflect your actual intentions, which could lead to costly and protracted litigation that will diminish the value of assets in your estate. An updated estate plan provides clarity and certainty around your intentions.