Estate Planning After Divorce

Estate Planning After Divorce

Estate Planning after Divorce

Divorce can affect many areas of your life, including your estate plan. Fortunately, updating your estate plan after a divorce is a relatively simple process. Best of all, an updated estate plan gives you the peace of mind of knowing that your loved ones will be cared for.

Updating Beneficiary Designations

After your divorce, it is important that you remove your former spouse as a beneficiary on any account, including life insurance, retirement accounts (including 401ks and IRAs), bank accounts, and brokerage accounts. While some beneficiary designations are automatically revoked by Utah law and/or your divorce decree, many retirement accounts are governed by a federal law known as ERISA. Accounts covered by ERISA require payment to the beneficiary listed on the form, even if you are divorced. Make sure that you request a beneficiary change form and submit it as soon as possible. Even if you believe the the beneficiary designation will be revoked automatically, it is a good idea to update it to avoid confusion and express a clear preference.

Power of Attorney and Advance Health Care Directive

Durable Powers of Attorney and Advance Health Care Directives allow you to nominate someone (known as an agent) to act on your behalf in the event you are unable to. Your Durable Power of Attorney is for financial matters, and Advance Health Care Directive is for your health care. Under Utah law, your former spouse will be removed as your agent after a petition for divorce is filed (for a power of attorney) or when the divorce becomes final (for a health care directive). If you have named an alternate agent, they will become your agent. Nevertheless, this is an ideal time to update your power of attorney and health care directive to remove your former spouse entirely. 

Wills and Trusts

Under Utah law, a divorce will revoke all gifts to your former spouse in your will and remove them as your personal representative (also known as an executor). It is important that you update your will to reflect how you would like your assets distributed and name a guardian for your minor children. While it is likely that your former spouse would be their guardian if you pass away, it is a good idea to name a guardian in case your former spouse has also passed away or is deemed unable to care for your children. 

It is also important to update your trust after a divorce. If you have minor children, a trust is generally preferable to a will, since you can nominate a trustee who can manage assets while your child is a minor. If your minor child inherits under a will, a court must nominate a guardian to manage the assets for them until they reach age 18, when they will inherit them outright.  Additionally, a trust allows you to control when you child receives their inheritance. Many parents choose to keep the money in trust until the child reaches a suitable age and give the trustee the authority to make distributions for college tuition or other appropriate expenses.  

Read Law can answer your questions on estate planning after a divorce and help you create a plan tailored to you and your needs.