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Estate Planning Checklist For Divorce

Estate Planning Checklist For People Going Through Divorce
Do you want your ex-spouse inheriting from you? Should your ex-spouse control your money? Do you want you ex-spouse to make healthcare decisions for you? If not, then keep reading to discover  19 mistakes to avoid to make sure your wishes are carried out.
 

A Quick Story

Let me tell you a story. I was sitting in my office when I received a call from a middle-aged lady. She was upset because her mother had recently died. And her mother’s IRA was all going to stepfather. They had divorced two years earlier. The daughter was shocked to learn that the IRA would go to an ex-spouse.
 
I had to explain to her that that’s what federal law states. A beneficiary designation on an IRA trumps whatever the divorce decree says. There was nothing I could do.
 
Now I’m sure this is not what the deceased mother had wanted. But the reality is that she should have updated her estate plan. And that should have included reviewing the beneficiary designations on her various account.
 
There are 19 mistakes that divorced people make. They are all too common. And they are also easily preventable. That’s why I created the following Estate Planning Checklist For People Going Through Divorce.

Stepmother Kept Stepchildren From Seeing Dying Father

I still get upset thinking about this situation. A man called me a while back. His father was in hospice. He only had two or three more months to life. 

The man wanted me to help him be able to see his father. I was shocked that he wasn’t being allowed to. However, his father had named his now wife as the agent in his Healthcare Power of Attorney.

The father had filed for divorce from the stepmother. But time went by, and the divorce process was never finished. Then the father’s health started declining rapidly. Before long, he was in hospice with only a short time to live. 

The two children were never allowed to see their father before he died. 

And then to add salt to the wound, the stepmom was the primary beneficiary on dad’s trust. And the father had added her as a joint owner to his checking account and house. 

Maybe it was the romantic in him. He was hoping that he and his wife would reconcile. But that never happened. 

And to add even more salt to the wound, the stepmom through away all of the family photographs and the father’s military medals. 

The moral to the story is that you need to be proactive about your wishes. If you want to make sure your wishes are carried out, then you need to be deliberate about that. 

We can help you. We have been helping people just like you for over 20 years. Attorney Paul Deloughery is rated Pre-Eminent by Martindale-Hubbell. He can help you avoid the 19 mistakes on the checklist.

If you have a question about estate planning and divorce, give us a call at 602-443-4888. We’re here to help.

Estate Planning Checklist
(For People Going Through a Divorce)

If you and your spouse are getting a divorce (or if you are already divorced), you probably have new wishes for what happens if you die or become incapacitated. For example:

  • If you are in a car accident before the divorce is finalized, do you want your spouse to make health care decisions for you? (Whether you do or not, you still need new documents.)
  • If you are in a car accident before the divorce is finalized, do you want your spouse to make legal and financial decisions for you by using your current General Durable Power of Attorney?
  • If you die before the divorce is finalized, do you want your spouse to inherit from you?

(Whether you do or not, you need new estate plan documents.)

WARNING: This checklist only discusses the estate planning issues for people getting a divorce. You still need a divorce attorney. There are key “do’s and dont’s” that your divorce lawyer will advise you about to make sure you’re in the best position before, during, and after your divorce.

Preparing For Divorce

Open a checking account and savings account in your name alone and start saving money. If you and your spouse have a joint revocable trust, do not open these new accounts in the name of that trust. You should always have access to savings of your own. If your spouse moves out and stops paying bills, you will need to pay them until temporary support orders can be entered.
If you are the one who is going to file for divorce, you’ll need money for a retainer. Start saving now and plan to initiate divorce proceedings when you have built up a reliable reserve.

Your divorce lawyer will have a list of other information and documents for you to provide. Start gathering these.

During The Divorce Process

Have you removed your spouse from your health care power of attorney? (Or do you even have a health care power of attorney?)

A health care power of attorney allows you to name someone to make health care decisions for you if, for example, you were in a car accident or had a health emergency and couldn’t communicate.

  • If your current health care POA names your spouse as agent, you may want to name someone else. Otherwise, if you’re in the hospital and can’t communicate, your spouse could make medical decisions on your behalf. (Including the decision to keep you alive or not!)
  • If you don’t have a health care power of attorney, and you end up in the hospital and unable to communicate, your spouse could make medical decisions on your behalf simply by virtue of being your spouse (including whether to keep you alive or not!).

Have you removed your spouse from your general durable power of attorney?

This document allows someone to make financial and legal decisions when you are alive but unable to act. (For example, you get in a car accident or are stuck outside the country.) If your current general durable power of attorney names your spouse as agent, you probably want to name someone else.

Have you removed your spouse from your will?

If you die before your divorce is finalized, does your will states that your spouse inherits from you? Until you’re divorce or until you revoke/amend your current will, it’s still legally in effect. Also, if your will names your spouse to be the personal representative (executor), then your spouse could hold up the process or cause other problems.

Have you removed your spouse from your trust?

If you die before your divorce is finalized, and your trust gives everything to your spouse, then that’s what will happen. If you die or become incapacitated before your divorce is complete, and your spouse is named as successor trustee, they will have control over the trust assets.

If you don’t want your spouse to end up with all your assets, or to control your money and property, then it’s important that you update your trust.

Have you consulted with an estate and business planning attorney to help your divorce attorney remove your spouse from all business entities and irrevocable trusts?

Examples of legal structures that require special attention include irrevocable life insurance trusts (ILITs), Qualified Personal Residence Trusts, charitable trusts (CRUTs, CRATs, etc.), limited liability companies (LLCs), corporations, and limited partnerships.

NOTE: A.R.S. §14-2804 may not automatically remove your spouse from these entities.

Have you removed your spouse as the nominated guardian of your minor children?

You may want to name someone other than your ex-spouse as the guardian if you die or become incapacitated.

If your ex-spouse has severe substance abuse issues or is an unfit parent, have you left enough cash in a trust to fund any future litigation necessary to prove your ex-spouse unfit to be guardian?

Leave enough cash in a trust so that the person you name as guardian of your minor children can fund the litigation required to prove your ex-spouse unfit to be guardian. If you are short on cash, you could get some term life insurance for this purpose.

If you have minor children, do you have a trust for those children?

Minor children cannot own property or have a bank account. If your children receive money or property after your death, someone will need to be appointed as the conservator to hold those assets on their behalf. (Your children’s other parent has priority to become the conservator.)

If you don’t want your spouse to have control of the children’s finances, you need to have a trust.

You can get a revocable trust that will name a trustee of your choosing to access and control the money that you leave for your children if you die.

If you answered “No” to any of the questions in this section, you owe it to yourself to secure your future and the future of your loved ones.

Planning After Divorce

Have you given your divorce agreement to an estate planning attorney?

If your prior estate plan was done jointly with your ex-spouse, then this should probably be a new attorney. A good estate planning attorney will want to know what obligations you have to your ex-spouse in the event of your death.

Have you removed your ex from your health care power of attorney? (Or do you even have a health care power of attorney?)

Your health care power of attorney (HCPOA) allows you to name someone to make health care decisions for you if, for example, you were in a car accident or had a health emergency and were unable to communicate. If you had a prior HCPOA that named your ex, that document is now probably out of date.
And even if you DO want your ex-spouse to be the one making health care decisions for you, then you definitely need new documents. The old HCPOA is no longer valid after the divorce.

Have you removed your ex from your will?

If your ex-spouse is supposed to inherit from you in your current will, you need to update that document. The gift to your ex-spouse becomes null and void after your divorce is finalized. And if you named your ex-spouse to be personal representative in your will, that document probably also should be updated.

Have you created a new trust?

If you had a joint revocable trust with your ex-spouse, hopefully all the assets were transferred out of it during the process of your divorce. You probably no longer want to use that trust. It is easier for you to create your own trust.
You should revisit who will inherit from you if you pass away. It is also good to review who will be in charge of your trust if you die or become incapacitated.

Have you removed your spouse as the nominated guardian of your minor children?

You may want to name someone other than your ex-spouse as the guardian if you die or become incapacitated. If you DO want your ex-spouse to be the guardian of your minor children, then you need to get a new will that does this.

If your ex-spouse has severe substance abuse issues or is an unfit parent, have you left enough cash in a trust to fund any future litigation necessary to prove your ex-spouse unfit to be guardian?

Leave enough cash in a trust so that the person you name as guardian of your minor children can fund the litigation that will be necessary to prove your ex-spouse unfit to be guardian. If you are short on cash, you could get some term life insurance for this purpose.

If you have minor children, do you have a trust for those children?

Minor children cannot own property or have a bank account. If your children receive money or property after your death, someone will need to be appointed as the conservator for your children. (Your children’s other parent has priority to become the conservator.)

If you don’t want your ex to have control of the children’s finances, you need to have a trust.

You can get a revocable trust that will name a trustee of your choosing to access and control the money that you leave for your children if you die.

Have you paid attention to your obligations (and your ex-spouse’s obligations) under the divorce agreement to maintain life insurance?

If your ex-spouse is required to maintain life insurance, request proof of this at least annually.

Have you updated all beneficiary designations on any of the following?

  • Employer retirement plans
  • Individual Retirement Accounts (IRA)
  • Annuities
  • Health savings accounts
  • Transfer on Death (TOD) investment accounts
  • Payable on Death (POD) bank accounts

Make sure the beneficiary designations are what you want. Your ex-spouse is not automatically removed as a beneficiary from your accounts. (Egelhoff v. Egelhoff, 532 US 141, 2001.)

Summary: In many cases, your family law attorney is not as well-versed in estate planning issues. Their focus is to help you dissolve your marriage and make decisions regarding asset distribution, custody, child-support, and such issues. However, beyond that, it is advisable that you revisit your estate plan with the assistance of a qualified estate planning attorney to help address the issues raised in this Estate Planning Checklist. An estate planning attorneys can work closely with your family law attorney to conclude this final step of your dissolution process.

ABOUT THE AUTHOR

Founding attorney Paul Deloughery has been an attorney since 1998, became a Certified Family Wealth Advisor. He is also the founder of Sudden Wealth Protection Law.

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