Does Divorce Have an Impact on Estate Planning?

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May 5, 2023 •  The Estate & Elder Law Center of Southside Virginia, PLLC
When you're in the midst of a divorce, you're probably not thinking about estate planning or your will. However, if you're divorcing, you should think about the impact a divorce can have on an estate plan.
Robert W. Haley, managing lawyer
Robert W. Haley
Certified Elder Law Attorney® Robert W. Haley brings over 27 years of legal expertise and knowledge to his firm, which concentrates solely on the areas of elder law, estate planning (Last Will & Testaments, Durable Powers of Attorney, Health Care Powers of Attorney, Living Wills, Trusts, etc.,.) Asset Protection/Medicaid Planning and fiduciary services. For many years, Robert practiced in real estate law, and in general practice, but decided to narrow his focus to elder law and estate planning when he realized the tremendous need for proper planning to be filled in Southside Virginia.

It is a valid question, and one worth asking: Does Divorce Have an Impact on Estate Planning? Even the most amicable divorce requires a review and update of your estate plan, as explained in a recent article from yahoo! finance, “I’m Divorcing. Will That Impact My Estate Planning?” This includes your will, power of attorney and other documents. Not getting this part of divorce right can have long-term repercussions, even after your death.

Last Will & Testament. If you don’t have a will, you should get this started. Why is this important? If anything unexpected occurs, like dying while your divorce is in process, the people you want to receive your worldly goods will actually receive them, and the people you don’t want to receive your property won’t. If you do have a will and an estate plan and if your will leaves all of your property to your soon-to-be ex-spouse, then you may want to change it. Just a suggestion.

State laws handle assets in a will differently. Therefore, talk with your local estate planning attorney and be sure your will is updated to reflect your new status, even before your divorce is finalized! If you are looking for guidance with these matters, be sure to reach out to us and schedule an appointment to see how we can help you in your planning for the future... Our newest office is in Lynchburg, on 810 Main Street!

Trusts. The first change is to remove your someday-to-be ex-spouse as a trustee, if this is how you set up the trust. If you don’t have a trust and have children or others you would want to inherit assets, now might be the time to create a trust. It is crucial to consult with an experienced and certified elder law attorney to see if a trust is right for your specific situation!

A Domestic Asset Protection Trust (DAPT) could be used to transfer assets to a trustee on behalf of minor children. The assets would not be considered marital property, so your spouse would not be entitled to them. However, a DAPT is an irrevocable trust, so once it’s created and funded, you would not be able to access these assets.

Review insurance policies. You’ll most likely want to remove your soon-to-be ex-spouse from insurance policies, especially life insurance! However, if you have young children with your spouse and you are sharing custody, you may want to keep your ex as a beneficiary, especially if that was ordered by the court. If you received your health insurance through your spouse’s plan, you’ll need to look into getting your own coverage after the divorce.

Power of Attorney. If your soon-to be ex spouse is listed as your financial power of attorney and your healthcare power of attorney, there are steps you’ll need to take to make this change. First, you have to notify the person in writing to tell them a change is being made. This is especially urgent if you are reducing or eliminating their authority over your financial and legal affairs. You may only change or revoke a power of attorney in writing. Most states have specific language required to do this, and a local estate planning attorney can help do this properly.

You also have to notify all interested parties. This includes anyone who might regularly work with your power of attorney, or who should know this change is being made.

Divide Retirement Accounts. How these assets are divided depends on what kind of accounts they are and when the earnings were received. The court must issue a Qualified Domestic Relations Order (QDRO) before defined contribution plans can be split. The judge must sign this document, which allows plan administrators to enforce it. This applies to 401(k) plans, 403(b) plans and any plans governed under ERISA (Employment Retirement Income Security Act of 1974).

On the question of "Does Divorce Have an Impact on Estate Planning?", it is crucial to meet with an experienced elder law attorney to make sure the proper docs are in place! Divorce is stressful enough, and it may feel overwhelming to add estate planning into the mix. However, doing so will prevent many future problems and unwanted surprises.  Not sure where to start and want to learn more about putting your own estate planning together? It bears repeating, that If you or a loved one are concerned about issues with estate planning and elder law concerns including Asset Protection/Medicaid Planning and questions regarding long-term care and the nursing home, reach out to us!  Book a call with us on our website: www.VAElderLaw.com to see how we can help! We have offices in BassettDanville and Lynchburg to serve you.

Reference: yahoo! finance (Feb. 3, 2023) “I’m Divorcing. Will That Impact My Estate Planning?”

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