How Divorce Affects Your Estate Plan

A divorce doesn't just disrupt your present-day life. It also impacts your plans for the future—including your estate plan.

If you prepared a will while you were married, you probably left money and possessions to your spouse. You also may have named your spouse to handle finances and make medical decisions if something happened to you. Once you're divorced, you probably don't want your ex running the show or running off with your money. But if you don't revise your estate planning documents, that's exactly what could happen.

Even if you've never done any estate planning documents, there's a good chance that your ex is the beneficiary of a life insurance policy, retirement account, or "payable on death" bank account. This means your ex will probably get the money, unless you name someone else.

Here are some important documents that may be due for an update in light of your divorce.

Powers of attorney and advance directives

If you have a will, you probably also signed these documents:

• A durable general power of attorney appointing someone to take over your legal and financial affairs if you are no longer able to manage them
• A healthcare power of attorney naming someone to make medical decisions for you if you can no longer make them
• An advance directive or "living will" that expresses your wishes if, for example, you were in an ongoing vegetative state after an accident and could no longer communicate

If you have named your ex or in-laws in any of these documents, you'll probably want to create new ones and choose someone else. You can do this at any time—you do not need to wait until your divorce is final.

Your will

Your state's laws may allow you to create a new will and other estate planning documents during the divorce process, or you may have to wait until the divorce is final. There are several good reasons to prepare a new will—or create a will for the first time—after a divorce:

• If you made your will while you were married, your state may ignore the part of the will where you left money and property to your ex. But it's risky to rely on this. If your will also leaves things to your in-laws, those clauses will stand.
• Your will also appoints your executor or administrator—the person in charge of handling paperwork and distributing your assets. If your will names your ex as the executor, they may still be allowed to perform this important job, even if the two of you haven't spoken for years.
• Your current will may name someone to act as your children's guardian if something happens to you and your children's other parent. A judge will make the final decision, but if your will names your ex-sister-in-law who now hates you, there's a good chance she'll be raising your kids.

To revise your will, you'll need to revoke your old one and have a new one drawn up. Never try to change a will by crossing things out and writing in the margins.

Trusts

If you've established a revocable living trust for yourself or a trust for your children, it's important to revisit these documents in light of your divorce. Many couples set up joint trusts, or they name each other as trustees who will oversee the assets in the trust after one spouse's passing. Your ex also may be a beneficiary of your trust.

This means that if you do not revise your trust, your ex could end up with your assets. Or, your ex could control the way your money is spent for your children.

Retirement accounts, life insurance, and more

When someone passes away, there are quite a few things that are not part of the "estate" handed down through a will. Instead, on your passing, these assets go directly to the beneficiary you've designated—even if that person is your ex. These include:

• Retirement accounts, such as IRAs, 401(k)s, and pensions
• Life insurance policies
• Bank accounts with a "payable on death" clause
• Investment accounts that are "transfer on death"

After your divorce is final, contact the institutions and companies that have your accounts and policies. Find out who is listed as a beneficiary and update this information if you need to. Don't assume beneficiaries have been updated just because you've been awarded something in the divorce decree.

Divorce changes your relationship with your ex and your former in-laws, but it doesn't automatically change your estate plan. To avoid unintended results in the future, take the time to revise your powers of attorney, will, trusts, and beneficiary designations to align with your new life.

If you need to create a new will, trust, or powers of attorney, LegalZoom can help. Preparing your estate planning documents through LegalZoom is fast and affordable. Get started by answering a few questions.