Breaking Up Is Hard To Do
Divorce and Your Estate Plan Documents
If you are in the midst of being divorced or are divorced from your spouse, chances are that you have your spouse or former spouse listed as beneficiary or Agent on a number of important legal documents. If you find yourself in such a circumstance, here is a list of estate planning documents you should consider updating to reflect the change in your life:
1. Power of Attorney. A Power of Attorney is a legal document that allows you as the “Principal” to appoint an “Agent” or “Attorney-in-Fact” to act on your behalf when it relates to your finances. For more information on a Power of Attorney, please read “I Got the Power.” Many married couples typically appoint their spouse as Agent, but you can see how this could be a problem if you are getting a divorce since your spouse would have access to your assets and private financial information. Once you are divorced, depending on where you live, there are statutes in place that may automatically revoke a former spouse from serving as Agent; however, it is important to revise your documents so that you can appoint an Agent in your former spouse’s place. You do not have to wait to take this step until the Divorce Decree is issued. If you are in the midst of a divorce and you no longer wish for your spouse to have this authority over your finances, you should update this document immediately.
2. Proxy Directive and Instruction Directive. A Proxy Directive and Instruction Directive are used in New Jersey and a Health Care Proxy and Living Wills are used in New York to determine what your health care decisions are and who is appointed to make health care decisions on your behalf if you are unable to do so. For more information on a Proxy Directive and Instruction Directive, please read “Don’t Neglect Your Health.” Again, it is likely that you have listed your former spouse as your Health Care Proxy. If this is the case, you should immediately revise your documents to appoint someone else, even if your divorce has not been finalized.
3. Last Will and Testament (“Will”). A Last Will and Testament is a legal document that directs how your estate is to be distributed upon your death. For more about a Last Will and Testament, please read “Where There’s a Will…” It is important to revise your Will once you have the final Divorce Decree since there may be specific provisions that you must include in your Will pursuant to the terms of the divorce. If you are considering updating your Will during the pendency of the divorce proceeding, you should consult with your matrimonial counsel to determine whether updating your Will in advance of the divorce being finalized is advisable. You may also want to direct who you wish to be the guardian of your minor children, if any, should anything happen to you (particularly if there are concerns regarding custody). New Jersey and New York law directs that upon a divorce, spousal designations are revoked unless specifically addressed otherwise. It is still recommended that your Will be completely revised so that it is up to date with your current circumstances and wishes.
4. Trust. A Trust is a legal relationship between the creator of the Trust, the “Grantor,” in which the legal title to property is entrusted to an individual or legal entity, the “Trustee,” to be managed according to the Trust terms, while potentially providing the Grantor and his, her, or their estate certain protections. If you do not already have one, setting up a Trust to manage alimony and child support obligations, and/or life insurance may be a good idea, especially after your divorce. In fact, many Property Settlement Agreements often contemplate the creation of a trust to achieve certain goals outlined in the Agreement, so it is important to complete the Trust to comply with the Agreement. If you do already have a Trust, depending on its terms and whether it is revocable or irrevocable, you should also look to revise any such existing trust to address your changed circumstances, if appropriate.
5. New Beneficiaries. If you listed your former spouse as beneficiary of a life insurance policy, retirement account, and/or a pay on death account, it is important that you review and coordinate your beneficiary designations with your current estate planning goals as provided under your updated Will.
We at Pashman Stein Walder Hayden, P.C. have assisted many individuals in such matters. If you need assistance with drafting or revising your estate planning documents after or during a divorce, please contact us.