With the filing of a divorce, estate planning documents should be updated to protect your interests. If you have a business or minor children and are getting divorced, this is especially important.
- Effect of Divorce on Durable Power of Attorney
With the filing of the divorce, a spouse’s designation as agent under any Durable Power of Attorney (DPOA) is revoked. Even if the you have an acceptable alternative agent, it will not be always be known or clear to a third party, such as a bank, that the spouse’s authority to act has been revoked. A soon to be ex-spouse may improperly act under an existing DPOA if certain protective measures are not taken.
Accordingly, we recommend you immediately put in place a new DPOA for financial matters. If you currently do not have a DPOA with an acceptable alternative agent, this is even more so critical.
Once signed, and if you know you have previously provided a prior DPOA to a financial institution or other third party, the third party should be advised that the prior document has been revoked.
The spouse should also be advised that the previous document was revoked.
- Effect of Divorce on Health Care Power of Attorney (HCPOA)
Unlike the DPOA, the current Living Will/Health Care Power of Attorney (HCPOA) continues in effect until the judgment for divorce is granted – there is no ‘automatic’ termination of a spouse’s designation as agent with the filing of the divorce. In other words, the soon to be ex-spouse will remain in charge of health care decisions during the pending divorce.
Accordingly, we recommend you immediately put in place a new HCPOA naming a new primary agent for health care matters. Once signed, the new HCPOA should be provided to your doctor and health care organization (e.g. Froedtert or Aurora) so that they will be aware of the new agent designation, and of the fact that any prior HCPOA that is on file has been invalidated.
The spouse should be so advised that the previous document was revoked.
- Effect of Divorce on Beneficiary Designations
You should immediately plan to change the beneficiary designations of all life insurance policies, annuity policies, payable on death (POD) account designations, transfer on death (TOD) account designations, IRAs, 401(k)s, so that the proper forms are ready to be filed as soon as the divorce is finalized. While the divorce is pending, you should consult with your attorney prior to making any changes. Though a divorce causes distributions to a former spouse to be revoked, you should not rely on the automatic revocation. The new designations should also consider the age of the new beneficiary. If the new beneficiary is young children, a trust should be created for their benefit, usually until at least age 25.
- Update your Will or Trust
You should immediately consider how you would want their estate to be distributed upon death, so that a new Will or Trust can be prepared to be signed immediately following the finalization of the divorce. The significant decisions are:
- Who should receive distributions?
- If distributes are to children who need to mature, to what age should the distribution be held in trust?
- Who do you want to designate as being your primary choice Personal Representative or Trustee? Alternate?
- Who is the primary and alternate choice to be guardian of minor children?
Originally published: October 14, 2019.
More Important Reading
- Estate Planning for Mixed Families and Second Marriages
- Your Family Business Succession Plan
- Why Have Estate Plan? An Investment in Your Family in Case of the Unexpected
- Time Marches On: Do I need to Update My Estate Plan?
Disclaimer: The information contained in this post is for general informational purposes only and is not legal advice. Due to the rapidly changing nature of law, Schloemer Law Firm makes no warranty or guarantee concerning the accuracy or completeness of this content. You should consult with an attorney to review the current status of the law and how it applies to your unique circumstances before deciding to take—or refrain from taking—any action. If you need legal guidance, please contact us at 262-334-3471 or [email protected]