Your Divorce is Final- The Next Step: Estate Planning
Your Divorce Decree: The First Step in Estate Planning
You have recently divorced your spouse and the judge has signed the divorce decree. Now what? Although you may feel as though you have spent enough time and money on lawyers, there is one last attorney you need to talk to: an estate planning attorney. If you and your former spouse had estate planning done together previously, it is necessary for you to come in and make changes to avoid having your hard earned money and property be distributed in a way you did not intend when you pass away. If you have not done any planning, now is the perfect time to get your affairs in order. When you meet with the estate planning attorney, it is crucial that you bring all necessary documents, including a copy of your divorce decree. This document will be helpful in determining what obligations need to be provided for in your documents, what accounts or property you now own, and how you own those accounts and property.
Effect of the Divorce on an Existing Estate Plan
Last Will and Testament
In New York, a divorce revokes all provisions in your will that benefit your former spouse. Should you die before executing a new will, the law will determine who receives your money and property. Even if the gifts to your former spouse are revoked, the law may or may not revoke gifts you made to your former spouse’s family, making it very important to revise this document as soon as possible to incorporate any changes you wish to make.
Revocable Living Trusts
In New York state all provisions relating to the former spouse will be revoked. If you and your former spouse previously had joint planning, it is important to review it and make any desired changes, as like wills, gifts to your former spouse’s family as beneficiaries of a trust may or may not be revoked as a result of the divorce.
Power of Attorney
In New York, filing for divorce revokes the former spouse’s appointment as agent (the person who would act on your behalf) under a financial power of attorney. If there are any outstanding powers of attorney with third parties, it is important for you to inform them of your divorce and provide them with a revocation so they are on notice that your former spouse is no longer authorized to act on your behalf.
Health Care Proxy
In New York, the designation of your former spouse as your agent for medical matters will revoked as a result of the divorce. It is incredibly important to keep this document up to date and to provide it to the necessary healthcare professionals.
Life Insurance
Because a life insurance policy is a contract with a third party, a divorce can sometimes complicate things. If you named your former spouse as a beneficiary of the policy prior to your divorce, state law varies as to whether that designation is automatically revoked. Even if the designation is revoked under state law, it is important to change the beneficiary designation so the company is on notice of your wishes. In some cases, although the former spouse is no longer entitled to the life insurance proceeds, if they were not informed, the benefit will be paid out to the named beneficiary (former spouse), and it will be the responsibility of the rightful beneficiary to sue and collect the proceeds from the former spouse. This may not be an issue in some instances, but in others, it could create a lot of avoidable drama.
Retirement Accounts
For accounts governed by the Employee Retirement Income Security Act of 1974 (ERISA), the designation is not automatically revoked. In order to ensure that your former spouse does not receive the benefits, you must affirmatively change the designation, provided that your divorce decree does not state otherwise.