Why do estate planning documents need to be updated when a couple is getting divorced? This simple story illustrates one of the key reasons.
An Arizona couple had been married for several years and during their marriage had built a very successful, multi-million-dollar business together. Perhaps they had focused on building the business rather than their marriage or maybe time simply changes relationships, however, they separated and filed for divorce. The process quickly became bitter and acrimonious.
They fought over minor issues and the divorce dragged on. They were both in their early 40’s so neither one had given much thought to dying; instead they were focused on neither one of them getting a dollar more than the other one would from the divorce settlement.To unwind and relax, the wife had joined some of her girlfriends for dinner. On her way home, there was a horrific car accident and she did not survive. Because their wills had never been changed – all of her assets – including her share of the business, were inherited by her estranged husband. Her family received nothing. A simple interim will would have directed her share of the marital estate to her heirs, not to her estranged husband.
This story highlights the primary reason to update a will, which is to ensure that your estranged spouse does not get your assets during the divorce. Additionally, you may want to provide for children from a former – or current – marriage.
Besides a will, there are legal documents to review and consider. Changing and rewriting any power of attorney documents, including a medical power of attorney is critical.Without a medical power of attorney, your estranged spouse could have decision making authority over your health. You will also want to change or revoke any financial powers of attorney that might have been given to your estranged spouse.
While a guardian for your minor children may have been named in your existing will, whether or not that can be changed will have to be discussed and agreed to by BOTH parties. An interim will cannot be written to exclude a parent as a named guardian unless that parent’s rights have been severed.
There are certain assets, such as a life insurance policy or 401k account, that have named beneficiaries. In most cases, these cannot be changed during a divorce action.The family law court may provide interim orders that allow beneficiary changes during the divorce. The divorce settlement agreement or decree may direct what beneficiary designations can or cannot be changed by type of asset. If you are working, notify your HR department of the finalization of your divorce and change in marital status.
Once the divorce is finalized, the interim will and other documents need to be reviewed and possibly changed again. If you and your former spouse had a trust together, and assets were held in the trust, the trust will need to amended or revoked and assets moved to a new trust. While both divorce and death are very difficult to consider or discuss, being prepared can prevent unneeded hardship on your family or children.
PREVIOUSLY PUBLISHED BY ABC15 Sonoran Living