When it’s time for divorce, it’s also a vital time to review your estate planning.
Because divorce can be so traumatic, many people overlook its ramifications on their estate plan. Don’t do that. Be sure to review your estate plan.
Divorce affects your financial power of attorney, healthcare power of attorney, will, trust, beneficiary designations on a retirement account or life insurance policy.
Wisconsin law is clear. Unless a governing instrument or court order provides otherwise, a divorce terminates the beneficial provisions for the former spouse. Also the former spouse – or relative of the former spouse – can no longer act in your interest (as a fiduciary). A divorce also changes your will or trust, terminating beneficial provisions for your spouse’s relatives.
So even if you want your former spouse to make healthcare and financial decisions for you if you are incapacitated, the spouse can not. Any designation of either a financial or healthcare power of attorney is void.
You need to choose someone else. If you don’t, your family would be forced to seek a guardianship so someone is authorized to make your healthcare or financial decisions. With proper post-divorce planning, this can be avoided.
There’s more. If your former spouse dies and has children from a previous relationship, he or she may want them to inherit the former spouse’s property. But the law terminates the children’s ability to inherit from a will or trust (created prior to the divorce from the person who is not their blood relative). The only way around this is to execute a new will or trust after the divorce.
There’s more to consider. And like all of the above, many of these developments might be unexpected.
Let’s say that you don’t want relatives of your former spouse to inherit from your estate. That could still happen because of default inheritance provisions. They are automatic. If you don’t plan effectively, those relatives may very well inherit from your estate. You have to make decisions now.
The conclusion is clear. After a divorce, be sure to update your estate plan.
That will make sure that your property goes to the people you want. If you are incapacitated, you’ll know that someone of your choosing can step in and make the necessary decisions on your behalf.
You can avoid trouble. You can avoid stress. You can avoid expense.
But the time to act is now.