Estate Planning Checklist for Divorce
If you have been through a Divorce, have you reviewed and updated your estate plan?
What does an estate plan entail after a divorce?
Almost everyone who has been divorced or is ending their marriage needs an estate planning checklist for divorce. It’s imperative they revisit their estate planning documents to avoid inadvertently giving their former spouse control over their estate. While the divorce process attempts to equitably divide assets, it usually falls short of addressing the estate planning needs of clients. In addition, it is prudent to revise estate planning documents during a divorce to ensure your wishes are carried out, as a contentious divorce can often last many years. Specifically, there are two areas that deserve special focus in this situation – pension plans and minor children.
In many states, if you get divorced, a state statute automatically treats the ex-spouse as being pre-deceased in your documents. What this means is if your ex is named as a personal representative, executor, or as a beneficiary of your estate, they will be automatically removed. This approach is fraught with peril because: (1) the statute only goes into effect upon divorce; and (2) certain retirement plans governed under a portion of Federal Law called the Employee Retirement Income Security Act (ERISA) (e.g. 401K’s and pension plans) will preempt the state statute from taking effect. See Egelhoff v. Egelhoff, 532 U.S. 141 (2001). Therefore, your ex-spouse may still inherit your retirement plan even after a divorce is final unless certain steps are taken by you.
Additional complexities occur when a Decedent leaves all their assets to their minor child(ren). Courts in Kentucky and Ohio require a guardianship until the minor is 18. In most cases, the ex-spouse usually is appointed guardian, leaving the ex-spouses with control over all the assets. I strongly recommend, in these circumstances, setting up trust and having a trustee of your choosing handle any assets that may pass for the benefit of a minor child.
Consider mitigating the effects of a future divorce by placing incoming assets in trust. In doing so, it may be possible to ensure they are not counted against a party for equitable division. It is important to see an attorney well versed in this area, as this is a constantly evolving area of the law.
The above examples are a few of many circumstances we often encounter when dealing with the estate in a divorce situation. Here is a “to do” list for individuals going through a divorce in order that your rights and assets remain protected:
- Revoke all prior estate planning documents and powers of attorney;
- Update your Will and/or Trust;
- Update your Power of Attorney, Living Will/Health Care Surrogate;
- Update and review your beneficiary designations on all accounts and insurance policies;
- Review how automobiles are titled;
- Nominate a guardian for any minor child(ren) (consider setting up a trust for them in your estate planning documents);
- Verify that your house is properly titled and/or devised in your will;
- Make sure all post-divorce settlement requirements are handled (i.e. life insurance); and
- Speak with relatives to ensure their estate plans take your divorce into consideration.
Authored by: Michael K. Ruberg is an estate planning attorney licensed in Kentucky and Ohio - (859) 344-6341.