Divorce and Estate Planning: A Guide to Crucial Updates 

Divorce often brings significant life changes and may create a complicated legal process. Much like other milestones and transitions, it can feel overwhelming, emotional, and chaotic. As a result, important alterations, such as updating an estate plan may be overlooked. 

While stepping back from legal documents for a short respite might be helpful if you’ve been through a divorce, delaying updates to your estate plan could be harmful. Perhaps, think of making changes to estate planning documents as one of the ways you can take control at a time when other areas of your life may feel out of control. 

If you made an estate plan as a couple, be sure to update it. Following a divorce it’s important for each person to have their own plan that includes essential documents, such as powers of attorney. If you didn’t have an estate plan before, this is a good time to create one. Contact your estate planning attorney or consider hiring one for assistance. 

Changes to consider 

Many states’ laws stipulate that if you die without updating your estate planning documents, your former spouse is treated as predeceasing you. This means your former spouse would no longer be a beneficiary or fiduciary in your estate plan after a divorce. However, these laws often do not disinherit your former spouse’s family members and do not affect beneficiary designations outside of estate planning documents. 

Revocable living trust or last will and testament: If your estate plan design was comingled with the intentions of you and your former spouse, you may want to update your revocable living trust or will. This is particularly important if you created a joint trust with your former spouse. Once you finalize your divorce, it is important to create and fund a new separate trust or restate your existing separate trust.   

The beneficiaries and terms of the trust or will might need amending to ensure that you leave your assets only to individuals you choose and in the manner you desire. Additionally, your trustees and executors should be reviewed to confirm they are trusted people or institutions you choose. By creating a new trust or will, you can make certain that you do not include your former spouse or their family members in your overall design.  

Financial power of attorney: A financial POA names individuals who will handle your financial affairs on your behalf if you are unable to do so. Often, we see only one person listed on these documents. If your document only named your former spouse, then no one would be in line to act on your behalf, which could necessitate a guardianship proceeding. Be sure to have a trustworthy individual as your financial agent, whether it’s someone new, like an adult child, or you want it to remain your former spouse. Keep in mind that this POA is only in effect until you die. 

Health care power of attorney: A health care (or medical) POA names someone who will make decisions on your behalf if you are unable to do so. This document typically goes together with a living will, which outlines your preferences for medical treatments, and together are known as an advance health care directive. Whoever you name will be able to choose the medical care you might get under critical conditions, such as CPR, life support, ventilation, or resuscitation. Similar to the financial POA, if your former spouse was the only individual named, you may not have an effective health care POA. Put careful thought into who you want to have this responsibility and be sure the health care POA reflects your decision. 

Health Insurance Portability and Accountability Act (HIPAA): Each of your doctors’ offices likely had you fill out a form to name individuals you will allow access to your health information, including through medical records or conversations with the doctor and staff. If you named your former spouse on these documents, you may want to revise them for your privacy. It isn’t required that you share health and medical information with someone, so you can update them accordingly. But note that authorizing access to a trustworthy person can be helpful for necessary medical decisions or managing medical bills. 

Digital assets: Don’t overlook changes to digital accounts you may share with your former spouse, or that they could access, such as user IDs and passwords. You might also need to update legacy contacts added to accounts or make your wishes known in your will for who can manage your accounts after you pass. If you don’t want your former spouse to view your social media accounts, consider adjusting your privacy settings as well. 

Beneficiary designations: The beneficiaries that are named on designation forms for retirement accounts, life insurance policies, and pay-on-death accounts will receive the assets. Therefore, if you keep your former spouse or their family members named on these forms, they will be entitled to receive these assets, even after a finalized divorce.  

Getting help 

Estate attorneys and financial professionals can provide valuable assistance during a difficult time like divorce — especially with sensitive matters related to your estate plan. In addition to your estate planning documents, there may be other financial matters that need addressing, including tax implications or prenuptial agreement terms. It’s important not to miss any areas impacted by a divorce. 

At Mercer Advisors, we connect all the dots of your financial life to help you build wealth, maintain financial security, and preserve your legacy. We have experience and expertise in guiding families through life-changing events. Connect with your wealth advisor if you need guidance with your estate planning concerns.  

If you’re not a Mercer Advisors client and want to know more about how we help clients through all aspects of their financial lives, let’s talk.