The impact of divorce on your New York estate plan
Divorce is a time of upheaval. Change is everywhere. You may sleep in a new bed, in a new home. You may drive a different car than you did when you were happily married. You may now have to share custody of your children. You may even live in a different state. With all this change happening in your day-to-day life, it is easy to overlook something else that needs to change after a divorce: your estate plan.
Why is an update needed?
Many people don’t understand the need to update their estate plan following the end of their marriage. Some people – particularly those who still enjoy a close relationship with their former spouse – might not think it necessary to name new beneficiaries for property or insurance policies, assign successors for accounts, ensure that a family-owned business doesn’t go into the hands of a non-family member or to even appoint a new power of attorney who could one day make tough financial decisions (or a health care proxy to make medical decisions). They might feel confident that their ex will be able to make decisions that are in the best interests of the entire family.
Other people, those whose current relationship with their former spouse is less cordial, might want to immediately start striking out provisions of a will, trust, insurance policy or other document that would give property or assets to the now-ex-spouse upon their death.
Still others might only want to ensure that their children are named as primary beneficiaries for all assets, accounts and insurance policies. This sort of update is very common among so-called “gray divorces,” those affecting couples in their 50s and 60s who have been together for 20 years or more and now have adult children. Actually, it might be a good idea for couples whose children have now grown to update their estate plans even if they don’t plan on divorcing. Without the need for the surviving spouse to provide for the children’s well-being, the assets can go directly to the children or other heirs.
Though there might be a thought that all of these updates need to be made immediately once it becomes clear that the marriage likely won’t last, that can actually cause problems. Depending on the laws of each state, there are different things that can or cannot be done prior to the divorce or while the divorce is still pending. In some jurisdictions, it might be acceptable to remove a spouse’s name from retirement accounts or insurance policies before the divorce is settled; in others, that same action could be seen as an attempt to defraud the court.
The best time to make changes to a settled will, trust or other estate plan documents – or to create a comprehensive estate plan for the first time – is probably not right before or during a divorce. If changes do need to be made, though, it is advisable that they be made with the assistance of an experienced New York estate planning attorney who is familiar with relevant laws and procedures.