By Miguel Torres, Partner at Miles and Torres Associates
Divorce is an ever-present feature of today’s society—half of marriages in the United States end up in divorce. It impacts your life in every possible way, from the emotional, familial, social, and definitely the financial. Even though it may be difficult to cope with the after-effects of divorce, it is imperative to make a plan for life after divorce. Part of this plan includes creating or revising your estate plan. If you have gone through a divorce, or even if you are just starting the separation process, you should review and revise your estate plan right away.
It is very common for couples to establish a joint estate plan while married, especially if they have children. Protecting one’s children in the event of death or incapacity is perhaps the leading reason for a married couple to create a joint estate plan. The estate plan usually names the other spouse as the main beneficiary and the agent to make decisions for the other in case of incapacity. However, after separation, both individuals may want to change their beneficiaries and the people who will make decisions for them in case of incapacity. You may be counseled to revoke or amend your existing documents if they contain bequests that are no longer desired and if you have children, there may be a need to create a trust where you name your trustee of choice and isolate the assets from the control of your former spouse. And beware, even if you don’t want to change your estate plan, California probate law will amend or revoke your will and trust for you upon divorce (by operation of law) so it is essential that you see an attorney to make sure you have a plan going forward that will carry out your wishes.
Revising your estate plan also provides you with the opportunity to choose new individuals who will make medical decisions for you if you are incapacitated. It is extremely common to name your spouse as the person to make such decisions, but perhaps after divorce you may want someone other than your former spouse to make those decisions for you.
No matter if your divorce is high conflict or mediated, it is essential to determine the effects of the separation or divorce on your existing estate plan. In many cases you may want to find a different attorney than the one who drafted the joint estate plan to handle your individual estate plan because the original attorney should not represent you both after separation.
If you are divorced and never created an estate plan, then now is the time to start. An estate plan puts your affairs in order, protects you and your loved ones from the unexpected, and helps you avoid the costly and lengthy probate process (the court-supervised procedure to transfer assets to your beneficiaries.)
While reviewing and revising your estate plan, you should also review and revise your beneficiary designations for life insurance, annuities, retirement plans, and IRAs, because if there is a discrepancy between the two, the beneficiary designations prevail, and the funds will be delivered to the named beneficiary, even if that was not your intent and even if it is a different person than who you named in your will and your trust.
Once you review and revise your estate plan, then you must also transfer legal title and property interests to your individual revocable living trust. You will want to make sure that your real estate and all your other assets are properly titled and reflect the fact that they are part of your individual trust.
Additionally, you may ask your relatives (in most cases parents or grandparents) to review their estate plans, as such plans may contain gifts to your ex-spouse, or may create trusts for children with your ex-spouse named as trustee. Your relatives may want to make an immediate change to these provisions.
There are several essential things you should do to rebuild your life after a divorce. Creating or revising your estate plan is one of them. Come and see us for a free consultation.