There are numerous estate planning issues that arise during a separation or divorce. If you are considering divorce, make sure you have properly addressed these issues and avoid significant consequences.
The first thing is to immediately revoke any power of attorney that gives your spouse powers over your health care or financial decisions. If you do not revoke these powers of attorney, your ex-spouse will continue to be her agent despite her divorce. Imagine your ex-spouse making your health care decisions or having access to her financial accounts even after her divorce.
If you do not have a health care or financial power of attorney, or after revoking your existing power of attorney, you must create a new one. You can do this before, during, or after your divorce. If your divorce is pending, you probably don’t want your future ex-spouse to have any kind of power over you or your assets. However, if you do not designate someone else, your spouse will likely act as the “default” agent if necessary.
The next thing to consider is your will. If you already have a will, review it. Most likely, your current will provides that everything goes to your spouse. Once your divorce is final, any legacy to your spouse is nullified. Still, if you don’t change your will, those bequests will be awarded if you die before your divorce is final. You cannot completely disinherit your spouse through a will because state law sets minimum amounts for a spouse, called “taking against the will.” You can still limit what your spouse receives to legal amounts.
Also, there is a good chance that your spouse will be named as your personal representative (or executor). Even after your divorce is final, this designation will remain valid. Finally, any legacy made to the in-laws will remain valid despite your divorce. There is often a provision in wills that in the event your spouse does not survive you and there are no other beneficiaries under your will, your assets are divided equally between your legal heirs and your spouse’s legal heirs . So you may have a legacy for his in-laws and not even realize it.
You may also consider appointing a guardian for minor children. In almost all cases, your spouse will continue to have parental rights and receive full custody of your children after your spouse’s death. However, if there is a valid reason, such as drug abuse or addiction, why your spouse should not receive custody, you should identify those reasons in your will and name the person(s) you want custody of. custody. Also, if your ex-spouse predeceases you, your will should control who gets custody.
In addition, you must establish a trust through your will (called a testamentary trust) to control assets left to minor or disabled children. That way, you can decide who makes the decisions about those assets until your children are old enough to receive them directly. If you don’t set up a trust and name a trustee, your ex-spouse likely has control over the assets left to your children. And, although the assets are supposed to be used for the benefit of the children, there is no practical way to control or verify that this is what really happens.
You should also consider a revocable trust. If you already have one, review it to remove powers and gifts given to the ex-spouse. Unlike a will, any gift given to a former spouse through a trust remains valid despite her divorce. Also, if your spouse is named successor trustee, that appointment remains valid despite her divorce.
There is also a benefit to having a revocable trust instead of a will. In some states, you can completely disinherit a spouse through a revocable trust. The reasoning is that the statutes that give your spouse a minimum amount of his estate only apply to his estate. However, assets that are placed in trust during your lifetime are not subject to probate. Therefore, if you title all of his individual property in your trust, you can prevent his spouse from receiving anything of his, even if he dies before your divorce is final. It can also serve as a continuing trust after his death to hold assets for his children without his spouse having control or decision-making ability.
In addition, you should review and update beneficiary designations on life insurance policies, retirement plans, etc. You may not be able to make some of these changes until your divorce is final. For most retirement accounts, your spouse must sign an authorization for you to supplement someone else as your beneficiary. The court may also prohibit you from making any changes while your divorce is pending. Just don’t forget to make the changes once your divorce is final.
Finally, you must repossess any assets you jointly own with your spouse. For many assets (such as home, car, joint investments, etc.), this may need to be done after your divorce is final. However, you can open your own bank and investment accounts at any time.