Amidst the battles over property and child custody, married couples who are undergoing a divorce often overlook the importance of updating their estate planning documents. While death and incapacity may be far from their minds during this emotional period, both spouses should always plan for the unexpected. This is especially important since failing to do so may inadvertently disinherit their children if their ex-spouse decides to remarry. The timing is particularly crucial in the process of “disinheriting” a spouse before, during, and after a divorce:
Disinheriting one’s spouse is not as easy as writing them off your will or trust. In most states, it is not even possible without a prenuptial or postnuptial agreement. This is due to the “elective share,” or the right to inherit a portion of a spouse’s estate upon his or her death. Since California is a community property state, there is a presumption that a spouse is entitled to half of all the property acquired during the marriage even if the will or trust says otherwise.
While it’s not viable to modify a will or trust to completely disinherit a spouse while you’re still married, there are other changes that should be made, including the updating of power of attorney documents and healthcare directives. It is unlikely that a soon-to-be ex-spouse would be a good candidate to make financial and medical decisions on your behalf in the event of incapacity.
During the Divorce Process
After filing for a divorce, an Automatic Temporary Restraining Order (ATRO) comes into play, freezing assets and preventing spouses from making changes to their beneficiaries, trusts, and other accounts. One way around it is for both spouses to come to terms with a separation agreement, which addresses issues such as division of assets and child custody while they are still legally married. This agreement may also serve as a basis for the outcome of the divorce.
Once the divorce is final, a spouse can finally amend his or her entire estate plan:
Wills – In some states, including California, any bequests to an ex-spouse are automatically revoked unless otherwise stated. It should be noted, however, that this could also apply for an ex-spouse’s children. If you still wish to support your stepchildren, you should take the steps to reflect this on your estate planning documents.
Guardianship – There’s not much you can do to prevent your ex-spouse from getting full custody of your children after your death, unless it was proven that he or she was “unfit” as a parent. However, you should still consider nominating a guardian in the event that both of you pass away while your children are still minors.
Beneficiary Designation – Apart from your will, you should also update the beneficiaries on your bank accounts, investments, retirement plans, and insurance policies. Although California law attempts to invalidate such transfers to former spouses, under the federal Employee Retirement Income Security Act (ERISA), state laws for certain plans such as 401(k) are superseded, which could mean that an ex-spouse would be considered a valid beneficiary despite the divorce. The only way to write off your former spouse would be to update the beneficiary designations.
Trust – If you have minor children, a trust may be a good way to ensure that your ex-spouse will not take control of your assets on their behalf. By putting the assets into a trust, you can appoint a trustee (other than your ex-spouse) to oversee the assets and income until your children are mature enough to handle it on their own. If you already have a trust, it may not be automatically revoked in the same way as your will, and may even require the consent of your ex-spouse. Consult a qualified estate planning attorney to discuss the creation of a trust-based estate plan for your unique life situation (e.g. a blended family).
It is always prudent to review and update estate planning documents for every life event change, especially in the case of divorce.