August 15, 2018
With the rise of the “gray divorce”, there appears a new area of consideration. Should the parties amend their estate planning documents while they are still married?
It is easy to understand why a person would want to change their will, Power of Attorney or other estate planning documents after the divorce. Obviously, they will want to remove the now ex-spouse as the executor, financial agent or from any other role to which they have been assigned. This task has typically been consigned to the “post-divorce” checklist; something to be accomplished after the divorce is finalized. For younger clients this may still make sense since the odds of dying or becoming incapacitated in the short-term is low.
However, the older we get the more likely we are to become ill, disabled or even to die during the divorce proceedings. So, it makes less sense to wait – why not amend some of the estate planning documents now?
Some tasks that could be addressed before the decree is finalized include amending a Power of Attorney and Health Care Directives. In most cases, your client will not want to leave the soon-to-be ex-spouse as the Agent in either of these documents, in the position to make important, possibly life-changing decisions about either finances or medical care. If the client does not have one or either of these documents, they should be encouraged to execute both as soon as possible. Irrespective of the divorce these are key documents for everyone to have.
In addition, amending the will may be desired if the spouse is named as the executor. There is nothing that prevents the client from naming a new Executor. The same goes for any trusts in which the spouse is named as trustee.
There are some items, however, that should not be changed until the divorce is finalized. Changes to the beneficiary designation of life insurance, pensions and retirement accounts should be left until the decree is completed. It might be decided that the ex-spouse should remain on these accounts as a beneficiary for purposes of securing support. In addition, some accounts need the spouse’s consent to remove them as the beneficiary and asking for that approval during the divorce could cause more strife and complicate the process.
The spouse should not be removed as a beneficiary of the will or a trust until the divorce is finalized. Doing so doesn’t prevent him or her from receiving their elective share and would be a waste of money at this point.
Lastly, you would not want to retitle joint accounts just yet. Changing the title does not change the marital status of the asset, and until the final division of the estate is agreed upon and it is decided how the joint account is split it might just be unnecessary work.
While there are many documents that will need changes and assets that will need retitling after the divorce, your client can get a head start by tackling a few of these while you are working on a settlement.