Estate Planning and Divorce

Creating an estate plan is essential if you want complete control over how your assets are managed after you die. While estate planning is complicated to begin with, there are several additional considerations if you've recently gone through a divorce. In this article, we look closely at estate planning and how a divorce factors into it.

How can divorce affect estate planning?

While the finalized divorce decree specifies how your legal and financial issues are handled, it doesn't necessarily change your estate plan. As such, you may decide to revise your estate plan to account for the new changes in your life. If you created a will before your divorce, there's a good chance you chose to leave some of your assets and belongings to your spouse. It's also possible that you named your spouse as the person to handle your medical and financial decisions in the event that you fall ill or become incapacitated.

If you don't want your ex-spouse to continue receiving these benefits, you must revise your estate plan. How you do this largely depends on what was included in your will before the divorce was finalized.

Revocable trust and divorce

During your marriage, you may have created a revocable trust as part of your estate plan. If you placed some of your assets into this trust to be managed and eventually distributed to beneficiaries after your death – and your ex was named as a recipient – you may wish to alter or cancel this trust.

While it's usually possible to cancel a revocable trust, the trust will likely be considered a marital asset. This means your spouse may be able to receive their share of these assets once you die unless you state otherwise in your settlement agreement. Even after your divorce is finalized, most states don't allow revocable trusts to be changed if they were made during a marriage.

However, if you have yet to create a revocable trust or get a divorce, you may be able to place language in a trust that allows for an alternate beneficiary if you happen to get a divorce. This may be an option to look into before you make a trust.


Dos and don'ts for estate planning during and after divorce

Don't forget to update your estate plan after a divorce

If you leave everything as it is or forget to create a will altogether, your ex-spouse could receive some or all of your assets when you die. The only way to completely control your assets is to update your estate plan regularly to account for any changes in your life.

Do consider revoking your old will altogether

Whether you were set to leave property to your ex or had decided to name your ex as the executor of your estate, tearing up your current will to create an entirely new one is highly recommended.

Do update beneficiary designations for additional documents and policies

While your will should cover most of your assets, some may be tied up in life insurance policies, brokerage accounts, bank accounts that pay after death, or retirement accounts. If you no longer want your ex-spouse to be the beneficiary of one or more of these accounts, you must update the document to name someone else as the beneficiary.

Do I need an estate planning attorney?

If you're considering updating your retirement accounts or your living will and trust, you may want to hire an estate planning attorney to assist with the process. Without professional assistance in these situations, you could make a costly mistake that diminishes the control you have over your own assets. You may forget to update an account that holds some of your assets or accidentally make an error on the updated document, voiding the changes you've made.

In any case, having an estate planning attorney by your side will keep errors at bay and help you make the right financial decisions. Before you hire an attorney, ask any questions you have about the process. You should be confident that the attorney you hire has your best interests in mind.

How to update your estate plan after divorce

Updating an estate plan after a divorce can be done in seven simple steps, which include the following:

  • Revoke your previous will so a new one can be created.
  • Update your health care proxy or surrogate.
  • Name new powers of attorney and beneficiaries for pertinent accounts.
  • Think about creating a trust to handle child support, alimony, and other assets.
  • Consider updating guardianship for your children if you have any concerns.
  • Take a look at the prenuptial agreement you made.
  • Review any life insurance policies you have.

Setting up a trust after divorce

If you have yet to create a trust, you can do so after your divorce to make sure your assets are effectively managed when you die. Your first decision is how to set up the trust, which could be revocable or irrevocable. Both options offer advantages.

An estate planning attorney can help you choose the right type of trust for your situation. You can then start creating a basic trust document. This serves as the foundation of your trust. The document will identify:

  • The trustor or grantor
  • Your assets and property within the trust
  • The trustee
  • Any trust beneficiaries who will receive your assets after you die
  • A successor trustee in the event that the original trustee dies while you are still alive

This document needs to be notarized. After that, the trust bank account can be officially created. Once the bank account is made, assets can be transferred directly to your trust. When you name trust beneficiaries in the document, you'll likely want to avoid naming your ex-spouse as beneficiary or trustee. This is easy if the trust is made after your divorce.

Estate planning for divorced parents

If you have children who are minors, creating an estate plan can be more complicated when taking your ex-spouse into account. Your primary concerns when updating your estate plan involve inheritance and guardianship issues. Guardianship involves naming someone to take care of your children in the event that you become incapacitated or die. The individual you name as guardian may be responsible for making sure your child receives support, education, food, and shelter.

You should have a conversation with your ex-spouse about how guardianship will be handled. In most cases, the other parent is automatically granted the role of guardian. As for an inheritance, estate plans typically set the child's guardian as the person who will manage funds and assets left to the child.

If, however, you are concerned that your ex-spouse may be unable to manage these assets properly, you could create a revocable living trust to hold your child's inheritance. This trust can be managed by an individual you set as trustee. You can make sure the trustee only uses funds in ways that would benefit your child.

Founder, CEO & Certified Family Law Specialist
Mediation, Divorce Strategy, Divorce Insights, Legal Insights
After over a decade of experience as a Certified Family Law Specialist, Mediator and law firm owner, Erin was fed up with the inefficient and adversarial “divorce corp” industry and set out to transform how consumers navigate divorce - starting with the legal process. By automating the court bureaucracy and integrating expert support along the way, Hello Divorce levels the playing field between spouses so that they can sort things out fairly and avoid missteps. Her access to justice work has been recognized by the legal industry and beyond, with awards and recognition from the likes of Women Founders Network, TechCrunch, Vice, Forbes, American Bar Association and the Pro Bono Leadership award from Congresswoman Barbara Lee. Erin lives in California with her husband and two children, and is famously terrible at board games.