Imagine this: you’re going through a divorce, and amidst the emotional turmoil, you forget to update your will. Then, the unthinkable happens – you pass away before the divorce is finalized. Could your soon-to-be ex-spouse still inherit your assets? The answer might surprise you.
Divorce throws many aspects of life into flux, and estate planning is no exception. While some laws automatically adjust your estate plan after a divorce, others don’t, leaving room for unintended consequences. This article explores the crucial intersection of divorce and estate planning, highlighting the key areas you need to address to ensure your wishes are honored and your loved ones are protected. From beneficiary designations to joint ownership and elective share rights, we’ll guide you through the essential steps to take when divorce disrupts your estate plan.
Divorce automatically affects estate planning laws
Certain laws in estate planning are immediately affected once a divorce is either pending or finalized.
Changes beneficiaries
For example, if a will was not changed post-divorce to exclude an ex-spouse, but a divorce occurs, states will generally deem a surviving ex-spouse as pre-deceasing the deceased spouse, which means they cannot inherit—the law will pretend they are dead and proceed through the law that way. This generally also applies to medical proxies and other special appointments under estate planning law, such as trustees or executors. You can check out California’s Cal. Prob. Code § 6122, which is one statute regarding this issue.
Joint property ownership is sometimes dissolved by divorce
For example, if a couple owns something in tenancy by the entirety, and the couple divorces, the couple then owns assets 50-50. However, this may not be the case for some other types of ownership, such as Joint Tenancy with Right of Survivorship (JTWROS). The divorce may not dissolve the joint tenancy, and it may need to be specifically resolved once a divorce is pending or final.
Keep in mind, laws can vary from state to state, so always check with your state law to understand exactly how divorce will affect your estate plan.
You should still change your estate plans ASAP when a divorce is pending
Even though the law may automatically disinherit a divorced spouse or even a pending divorce, there are sometimes exceptions, and every state law is different. Here’s why you should update your estate plan as soon as your divorce is filed:
Beneficiary designations in life insurance or 401ks or other account beneficiaries may not change
For example, some places in your estate plan may not automatically change when you get a divorce, such as life insurance beneficiaries or 401k beneficiaries. This is dependent on state law. So, it’s always important to make a global change in all of your beneficiaries and asset distribution structure when filing for divorce.
Joint property ownership may not be affected
In addition, some joint property ownership structures may not take into account a divorce, such as Joint Tenancy with Right of Survivorship (JTWROS), depending on the state. This means you will need to specifically change the ownership of the joint tenancy while a divorce is pending or final so it can be dispersed properly in your estate plan. Otherwise, the asset in JTWROS may be the property of the ex-spouse when you die.
Elective share rights may still apply
Elective share rights may not be affected while a divorce is pending, and a spouse could potentially be able to inherit from your estate if the divorce is not final. An elective share right says that a spouse can take a portion of your estate even if you wrote them out of the will. It’s a way to protect surviving spouses from being written out of the will. This situation would matter if you died while the divorce was pending—in some states, it’s possible that your spouse could still inherit from you even if they weren’t in the will and even though the divorce was pending. Yikes!
How soon should I update my estate plan?
As soon as possible once you know that your marriage is ending. If you know that you are going to file for sure or if your spouse is going to file—it’s time to call an attorney to update your estate plan. As you can see from the examples above, there are several situations where a pending divorce or even a finalized divorce may not have an effect, and your future ex could inherit from you. There are some legal protections in place for divorcing spouses in their estate plans, but it’s always the safest bet to get your estate plan updated ASAP.
Note: Don’t move assets around during a divorce
You may be tempted to transfer some of your assets to your kids or siblings (after all, that’s who your new estate plan beneficiary is). However, altering ownership of assets, including transferring or dissolving them, can be a sensitive issue during a pending divorce. It’s best to avoid doing this, as it might be perceived as an attempt to conceal assets from the court responsible for dividing marital property.
Why is this so important? Courts strive to ensure a fair and equitable distribution of assets between divorcing spouses. Unexpectedly transferring assets that may rightfully belong to the marital estate could undermine this process. Such actions might be seen as depriving one spouse of their rightful share.
Think of it this way: Imagine a couple is divorcing, and one spouse suddenly transfers a jointly owned vacation home to a relative. This would unfairly diminish the marital estate and impact the other spouse’s deserved portion.
What if we have a joint will?
It depends on your state law. Some states have revocation statutes that will revoke the will automatically upon divorce. However, joint wills are a little different. A lot of them are created to be irrevocable–meaning they cannot be revoked, even in a divorce. This means that you should definitely be revoking your joint will and creating a new individual will if you are getting a divorce.
Don’t forget to update guardianship
If you have minor children and have been appointed guardianship in a will or a joint will, you will want to reconsider the guardianship appointment in the event of a divorce. For example, if you previously were okay with your sister-in-law being the guardian of your children, but post-divorce, things are much more complicated, you may want to reconsider this guardianship appointment. Remember, guardianship typically applies if your spouse/ex-spouse pre-deceases you. Otherwise, custody generally goes to the surviving spouse (a.k.a. your ex).
The bottom line on how divorce affects estate planning
The takeaway is that a pending or finalized divorce decree does automatically affect certain estate planning laws, but not all. In some situations, your estate planning documents will be automatically updated based on your divorce to ensure your ex-spouse isn’t included. However, in other situations and in certain states, this may not be the case. That is why updating your estate plan as soon as you know a divorce is on the rise is the best practice for this situation.
Nicole Sheehey is the Head of Legal Content at HelloPrenup, and an Illinois licensed attorney. She has a wealth of knowledge and experience when it comes to prenuptial agreements. Nicole has Juris Doctor from John Marshall Law School. She has a deep understanding of the legal and financial implications of prenuptial agreements, and enjoys writing and collaborating with other attorneys on the nuances of the law. Nicole is passionate about helping couples locate the information they need when it comes to prenuptial agreements. You can reach Nicole here: Nicole@Helloprenup.com
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