How Does Divorce Affect Your Estate Plan?
Divorce is hard enough without the added stress of reworking your estate plan.
But in this moment of change, it’s essential to make sure your and your family’s futures are still protected. Taking the time now to revisit your estate documents can prevent confusion and complications down the road.
This guide will walk you through how divorce affects your estate plan and what needs to be updated. Whether it’s revising your will, choosing new beneficiaries, or securing your children’s financial future, it will help you feel confident that your estate plan reflects your new reality.
Estate Planning Post-Settlement Overview
Dividing property like real estate, investments, and other assets during a divorce can have a big impact on your estate, and the amount you’ll be able to pass down to your loved ones.
In Oregon, assets acquired during the marriage are divided fairly, though not necessarily equally. The state follows an equitable distribution model.
In contrast, Washington follows community property laws, where assets acquired during the marriage are generally divided equally between spouses.
Reviewing your settlement can give you a good idea of what to update in your estate plan.
How Soon in Advance Should You Start Thinking About Changing Your Estate Plan?
The short answer is: as soon as your divorce proceedings begin. Some parts of your estate plan will make sense to change while your divorce is still pending to protect certain assets and revise beneficiaries quickly. Other changes, like adjusting retirement accounts or certain joint assets, may have to wait until your divorce is finalized.
Finish updating your estate plan as soon as your divorce is complete. Delaying those updates could lead to unintended consequences, such as your former spouse receiving assets or having decision-making power in an emergency.
Documents to Update in Your Estate Plan
Going through a divorce is challenging enough without worrying about your estate plan. But reviewing it now can save you and your loved ones from complications down the road. By revisiting key documents, you ensure your wishes are honored and your family's future is protected. Let’s take a look at the most important updates you should consider.
1. Your Will
If you already have a will in place, it’s a good idea to revise it once your divorce proceedings begin. According to both Oregon law and Washington law, a divorce revokes any provisions in your will in favor of your former spouse. Other beneficiaries named in your will, such as children or relatives, remain intact.
However, this isn’t the time to leave things to chance.
An outdated will can create confusion. It’s best to update your will during or after divorce, to ensure that your estate is managed according to your current wishes. Consider naming a trusted friend or family member as executor to take on responsibilities that your former spouse might have previously handled.
2. Revoking or Modifying Living Trusts
Do you use a living trust to manage your assets?
Divorce can impact the terms of a joint revocable trust with your former spouse. After a divorce, you may want to dissolve or amend the trust to reflect your new financial situation and remove your former spouse’s authority.
Take the time to revise or revoke the trust. Make sure your assets go where you want them to, and not where outdated plans say they should.
3. Reviewing and/or Changing Beneficiaries
Not all assets pass through your will. Things like life insurance policies, retirement accounts, and pay-on-death accounts transfer directly to the account beneficiary. If your former spouse is named as the beneficiary on any of those accounts, they’ll be entitled to the funds.
Update your beneficiary designation if you don’t want your former spouse to receive those funds. Consider naming your children, family members, close friends or charitable organizations.
4. Power of Attorney and Healthcare Directives
Among your estate planning documents, remember to review your power of attorney and healthcare directives. These documents are what give someone the legal authority to make financial or medical decisions for you if you can’t.
Like many couples, you may have named your spouse for these roles. But now, it’s worth reconsidering who you want in charge of these important decisions.
If you don’t feel comfortable with your former spouse having power of attorney, it’s time to update your plans. Think of someone you trust to act in your best interest. Maybe it’s an adult child, a sibling, or a close friend.
Transferring power of attorney promptly ensures that your medical and financial needs are managed by someone who understands your current wishes and circumstances.
How to Protect Your Children’s Future
If you have children, divorce can make estate planning feel even more complicated. The important thing is to make sure your plan reflects the future you want for your children – whether that's financial security or naming the right guardian.
If your divorce settlement involves alimony or child support, make sure your estate has the resources to cover those obligations or your children may face unintended financial consequences. If your estate does not have sufficient resources to meet your obligations, your former spouse may take legal action. This can lead to lengthy court battles and unnecessary stress.
Life insurance can be a simple solution to protect your children financially, even after you’re gone. Taking these steps can give you the confidence of knowing your children are taken care of.
What You Can And Cannot Update
After a divorce, there are some parts of your estate plan that you can change freely, like your will, trust, and power of attorney, and others that are fixed. The specifics will depend on your circumstances and divorce settlement.
For example, your settlement may require you to keep your former spouse or children named as life insurance beneficiaries. Alimony or child support agreements could also impact how you structure your estate plan. Other assets, like jointly owned property or retirement accounts, may require additional steps to change.
Consult with your attorney before updating your estate plan to ensure you’re complying with any legal requirements related to your divorce.
Decide What to Leave to Your Spouse
Deciding what, if anything, to leave to your former spouse is an extremely personal decision. There’s no right or wrong answer and it is a decision to be made with the utmost care.
If you maintain a strong co-parenting relationship with your former spouse or depending on your family dynamics, you may want to leave them some assets. Or, you may prefer that your former spouse has no involvement with your estate once your divorce is finalized.
Speak With a Family Lawyer About Your Estate Plan
For 40 years, Gevurtz Menashe has supported families through some of their toughest times.
If you need assistance navigating your estate plan during or after your divorce, please call our office at (503) 227-1515 or contact us online, anytime.