11 Aug Estate Planning Considerations in Light of Divorce
Authored by Attorney Gretchen J. Burgess
Going through a divorce has implications in many aspects of a person’s life, including financial position, medical decisions, considerations for loved ones, and planning for the future. It is very important to revisit your estate plan after filing for divorce or legal separation, although keep in mind that you may be prohibited from implementing any changes until after the divorce or legal separation is complete. A few of the most important factors that could affect your estate plan in light of a divorce include, but are not limited to, the following:
- Beneficiary Designations. It is important to update beneficiary designations for assets such as 401(k)s, IRAs, and life insurance policies upon divorce. It is not safe to assume that your divorce settlement or decree automatically revokes any prior beneficiary designations on your assets that name your former spouse as beneficiary. However, it is imperative to make sure that new beneficiary designations comply with the terms of your divorce settlement or decree, as the settlement may include obligations to your former spouse in the event of your death, such as a requirement to name your former spouse as the beneficiary of certain assets. It is important to provide your estate planning attorney with a copy of your divorce settlement or decree so the attorney can provide you with proper planning advice regarding how to update your beneficiary designations.
- Last Will and Testament. Wisconsin law provides that any bequest to a former spouse or to a relative of a former spouse in a Will that was executed before divorce is revoked upon divorce. Additionally, the nomination of a former spouse or a relative of a former spouse in your Will as the personal representative of your estate is also revoked upon divorce. Although these provisions are revoked in the event of divorce under law, it is still wise to revoke the prior Will and execute a new one upon divorce. Doing this will avoid any confusion in the future regarding your intentions. If you wish to keep any of these individuals in your Will, it is also important to update your Will to expressly state your intention that these individuals still be included despite the divorce and to rebut the presumption that provisions related to a former spouse or a relative of a former spouse are revoked.
- Trusts for minor children. Upon finalizing a divorce, consider including provisions in your estate planning documents that provide for the creation of separate trusts for your children upon your death. This is especially important to consider if you have minor children. If your children are still minors at the time of your death, it is likely that your former spouse will become their legal guardian and will also have control over their finances until they turn 18 years of age. Including provisions in your estate planning documents that mandate the creation of separate trusts for your children if they have not yet attained the age of majority at the time of your death allows you to designate someone other than your former spouse to control the funds that your children receive from your estate.
- Revocable Trust. If you executed a revocable trust jointly with your spouse during your marriage, it is important to make sure that any assets that are titled in the name of the trust or made payable on death to the trust are updated to ensure that such assets are distributed in accordance with your wishes.
- Power of Attorney for Finance. Under the laws of Wisconsin, the authority of a spouse to act as an agent under a financial power of attorney is revoked when either spouse files for divorce. Despite this, it is advisable to execute a new Power of Attorney for Finances and Property to make your intentions clear that your former spouse is not authorized to act on your behalf, and to nominate another person as your agent.
- Power of Attorney for Health Care. In Wisconsin, a divorce or legal separation completely invalidates the Health Care Power of Attorney document if the former spouse is nominated as agent. Therefore, it is important to have this document reviewed and updated in the case of divorce or legal separation in order to nominate someone to make health care decisions on your behalf in the event that you are unable to do so yourself.
- Prenuptial Agreement. If you choose to remarry, consider a prenuptial agreement to protect assets in the future.
This article was written to provide general guidance and is not an exhaustive list of potential items to consider upon divorce or legal separation, and not all of the above recommendations will apply to all situations. Readers are encouraged to reach out to legal counsel to determine the applicability of these issues to their own personal needs. If you have questions, would like your estate planning documents reviewed and/or updated in the event of a divorce or legal separation, or if you would like to schedule a consultation with an estate planning attorney, please reach out to Neider & Boucher. We have highly qualified legal professionals who would be pleased to work with you. Please call us at (608) 661-4500.