Divorces are often draining – financially and emotionally. As a result, many do not want to incur more costs or even think about different financial arrangements. However, anytime there is a significant change in your family (death, divorce, disability, births, etc.), your estate plan should be at least reviewed.
Although our list could be much longer, here are 6 matters to consider:
The most typical wills of a married couple is all to each other. However, under Texas law, the former spouse is treated as if he or she predeceased the deceased spouse if the will is not changed. Nonetheless, there are several reasons why you may want to change your will, including:
- Different beneficiaries. Perhaps your children were the contingent beneficiaries named in the will and you become estranged from one or more of them – whether due to the divorce or for other reasons such as you might have a new significant other. Sometimes laws have changed. For example, the Secure Act changed the law this year on how soon a beneficiary of your retirement account would be income taxed after you die and you may prefer more of the retirement account be distributed to a special needs trust for a disabled child so that the retirement account distributions could be stretched over the life expectancy of the child since a disabled beneficiary could stretch receipt of retirement income unlike most other beneficiaries (other than a beneficiary who is chronically ill, less than 10 years difference in age than you or if your beneficiary is a minor child of yours)) .
- Different executor, trustee or guardian. Although your former spouse is no longer considered a beneficiary, they still might be named as the executor, trustee, guardian, etc., and you may want to consider someone else or at least the order.
- State laws differ. If you move to another state, your former spouse may not be treated as if they predeceased you (unlike Texas). Most do not want their former spouse as their beneficiary.
- Inadvertent disinheritance of former spouse. Although unusual, sometimes it is desired that the former spouse be a beneficiary. As stated above, if a new will is not signed, the former spouse right to be a beneficiary would be nullified under Texas law.
My Living Trust
It depends on the language of your trust. Since Texas is a community property state, most living trusts involving a married couple are joint. However, unless the trust provides what happens in the event of divorce, Texas law does not automatically nullify a bequest to your spouse like it does under a will.
Unless there is something to the contrary in your divorce decree, Texas law considers your former spouse to have predeceased you if named as a beneficiary. However, you should always review beneficiary designations (which supersede your will) – whether it be of a life insurance policy, annuity, IRA, pension, etc. for tax reasons, contingent beneficiaries, etc.
Employee benefit plans (such as 401Ks) are based on federal (not state) laws. Under a U.S. Supreme Court decision, the governing documents of the plan regarding the distribution of benefits must be followed by the plan administrator. So, in the case before the Court, even though the former spouse released any rights to the plan under the divorce decree, she was entitled to her former husband’s benefits since he never removed her as a beneficiary under the plan.
My Power of Attorney
Your ex-spouse’s authority stops unless the power of attorney states otherwise. The rules differ from state to state. The document will determine whether notice of revocation is needed although it may be a good idea to give notice of revocation to the agent. If you own real estate, the revocation should be recorded with the county clerk where the property is located, particularly if the power of attorney was previously recorded. You might also give notice of the revocation to each financial institution where you keep assets.
Medical powers of attorney may be revoked by informing your agent or health care provider in writing or orally or by signing a new medical power of attorney.