Protecting Your Assets When Going Through a Divorce

Going through a divorce can be one of the most stressful and life-changing experiences someone can face. Along with the emotional toll, many legal and financial adjustments are necessary. Updating your will and beneficiary designations is an important part of the process when going through a divorce, especially when it comes to trusts and asset protection.

While people tend to think about dividing assets and child custody during a divorce, they often forget how divorce affects their estate plans.

Failing to update these key documents could mean that your former spouse or other unintended parties inherit your assets, have control over medical or financial decisions, or even oversee your children’s guardianship.

This article will explain why updating your will and beneficiaries after a divorce is essential, why it’s best to do this during the divorce proceedings, and what you should consider in these updates.

Trusts and Divorce: Reasons to Update Your Will and Beneficiaries During the Divorce Process

Although it may seem like something to tackle once the dust has settled, updating your will and beneficiary designations should ideally be handled during your divorce, not after.

Here’s why:

• Asset Control: If you don’t update your will or trust during the divorce, your ex-spouse could still be entitled to the assets specified before the divorce. Divorce doesn’t automatically revoke your will or remove your ex as a beneficiary. If something were to happen to you before you make the changes, they might still inherit property or financial assets, depending on how your will was previously structured.
• Guardianship of Children: If you have children, this is a crucial area to focus on during the divorce. Many people do not realize that if they die before making necessary adjustments, their ex-spouse could gain control of both the children and their inheritance, which may not align with your intentions. Nominating a trusted person as guardian for your child in the event of your death is critical. Courts may not accept your nomination, but it will be considered.
• Avoiding Legal Complications: By addressing these updates during your divorce proceedings, you can work through potential complications with your attorney, ensuring a smoother process. Waiting until after the divorce could require additional legal fees and more time, not to mention the emotional strain of revisiting those aspects again.
• Peace of Mind: Handling these details early allows you to finalize your divorce with peace of mind, knowing your financial future and estate are aligned with your new life circumstances.

What to Update After a Divorce

Updating your estate plans after a divorce is more than just revising your will. Various documents may need to be adjusted to ensure your assets go where you intend and that the right individuals are responsible for your healthcare or financial decisions if needed.

1. Will: The most critical document to update is your will. Your previous will likely names your ex-spouse as the primary heir and possibly executor of your estate. You’ll want to revise it to reflect your new wishes, whether that involves leaving assets to your children, new partner, or other family members.
2. Beneficiary Designations: Many assets, like life insurance policies, retirement accounts (401(k), IRA), and payable-on-death accounts, pass to the named beneficiaries and not according to your will. If you fail to update these, your ex-spouse could still be the designated beneficiary, even after the divorce.
3. Power of Attorney (POA): If your ex-spouse is listed as your financial or healthcare power of attorney, it’s essential to update these forms. Without changes, your ex could still make medical or financial decisions on your behalf, which most people wish to avoid after a divorce.
4. Trusts: If you’ve created a trust, you’ll need to update the trustees and beneficiaries to reflect your post-divorce wishes. Many people prefer to place assets in trusts for children rather than leaving them outright to an ex-spouse.
5. Living Will/Advance Directive: Review your living will or advance healthcare directive. If your ex-spouse was previously designated to make decisions regarding your healthcare in the event you cannot, you will need to change this to reflect your current preferences.

Additional Considerations When Updating Estate Plans

Missouri law includes an automatic revocation statute, which means that if you have a will in place and then get divorced, any provisions in the will that name your ex-spouse as a beneficiary or executor are automatically revoked upon the finalization of the divorce. This ensures that your ex-spouse will not inherit from your estate or act as your executor unless your will is updated to reflect that intention after the divorce.

However, this revocation does not extend to other important documents such as life insurance policies, retirement accounts, or other assets that name your ex-spouse as a beneficiary. This also does not apply if you pass during a divorce.

You must manually update these designations to ensure your ex-spouse is no longer listed as a beneficiary, as they will remain in place unless explicitly changed. Changing your estate plan before a divorce will preserve the bulk of your estate.

There are other key points to keep in mind:

• Prenuptial or Postnuptial Agreements: If you signed a prenuptial or postnuptial agreement, make sure your new will and estate plans are in line with the terms of that document. Your divorce lawyer can help you ensure that any necessary updates are compliant with existing agreements.
• Tax Implications: Divorce can also impact the tax implications of your estate plans, especially when it comes to the inheritance tax and the division of assets. Working with both your attorney and a financial advisor can ensure you avoid any unintended tax burdens after updating your estate plans.

Protect Your Future with Estate Plan Updates

Updating your will and beneficiary designations after a divorce is crucial to protect your assets and ensure that your wishes are carried out. While it might not be at the forefront of your mind, addressing these issues during your divorce process provides greater security and peace of mind.

From revising your will to updating beneficiary designations on important financial accounts, making these adjustments ensures that your assets will be distributed according to your current preferences, and your ex-spouse won’t have control over important decisions in your life.

If you’re going through a divorce or have recently finalized one, now is the time to revisit your estate plans. At Bruce Galloway Law, we specialize in guiding clients through the legal complexities of divorce, wills, and estate planning.

Contact us today to schedule a consultation and ensure your estate is in safe hands.