As a family law attorney, you guide clients through one of life’s most challenging transitions: divorce. The finalization of a divorce decree often brings clients a sense of closure while marking the beginning of a new chapter—one that has a profound impact on their financial future, family, and legacy. This is where estate planning becomes not just beneficial but essential and a natural extension of your services.
While your clients may feel “lawyered out” after their divorce, it is crucial to emphasize that the divorce decree, while powerful, doesn’t automatically resolve all estate planning matters. In fact, it often creates an urgent need for a comprehensive review.
Why Estate Planning Is Critical Post-Divorce
Many clients assume that their previous estate plan, or at least the parts that benefited their former spouse, is automatically revoked. While state laws and divorce decrees can automatically revoke certain provisions—such as naming a former spouse as a personal representative, a trustee, or an agent under a power of attorney—this isn’t always the case for all aspects of their plan.
Former spouses can remain beneficiaries on wills, trusts, joint property, and various accounts, which can result in an unintended inheritance if your client suddenly passes away without modifying their estate plan. Furthermore, beneficiary designations naming other former family members such as in-laws or stepchildren are typically not subject to revocation by law. Without a proactive review and quick action, your client’s hard-earned assets might not be distributed according to their new wishes and life circumstances.
This presents a significant opportunity for you to provide invaluable ongoing support and ensure your client’s peace of mind.
Key Estate Planning Provisions Within a Divorce Decree
The divorce decree itself contains vital components of a revised estate plan.
- Support obligations: Does the decree mandate life insurance to secure spousal or child support? Consider advising clients to designate a living trust as the beneficiary instead of the ex-spouse directly (if the decree allows). This empowers a trustee, rather than the ex-spouse, to manage distributions for minor children, ensuring funds are used as intended and not diverted.
- Property division: The decree outlines asset division, but how property is owned is equally important. Joint tenancy or tenancy by the entirety ownership often converts to tenancy in common postdivorce. This change is significant: If a client passes away while owning property as a tenant in common, their interest goes to their heirs, not automatically to their former spouse. Without an updated estate plan, state law dictates who receives these assets, which may not align with your client’s desires. Proactive planning enables the client to select their beneficiaries and determine how they will receive the property.
- Action item: Ensure your client completes all steps required by their divorce decree to finalize property division, such as executing deeds or changing account ownership, to prevent unintended outcomes.
The Divorce Decree’s Impact on Existing Estate Plans
Here's a closer look at how divorce can affect common estate planning documents:
- Last will and testament: State laws vary. Some laws revoke all provisions benefiting a former spouse, while others only revoke a former spouse’s appointment as personal representative or executor. Even if gifts to a former spouse are revoked, gifts to their former relatives such as in-laws or stepchildren may not be. A new will is needed to reflect current wishes and intentions.
- Revocable living trust: Like with wills, state laws vary in their impact on trusts. While a divorce decree may include provisions regarding existing trusts, reviewing and amending the trust documents is crucial to avoid confusion. Gifts to a former spouse’s family members under the trust are generally not revoked.
- Financial power of attorney: Divorce may revoke a former spouse’s appointment as an agent, depending on the state. Regardless, clients should inform third parties such as banks and financial advisors of the divorce and provide a revocation or an updated power of attorney to prevent unauthorized actions.
- Medical power of attorney: State laws vary on whether a former spouse can continue to make medical decisions on behalf of their ex-spouse if they remain named as an agent in a power of attorney. However, it is often unlikely that your client will still want them in this role. Therefore, updating the medical power of attorney and providing the updated version to healthcare professionals is crucial.
- Life insurance: As a contract with a third party, life insurance beneficiary designations are often not automatically revoked by divorce in most states. Even if state law does revoke it, clients must formally change the designation to notify the company and prevent proceeds from being paid to the former spouse, leading to potential legal battles.
- Retirement accounts (ERISA-governed): For retirement accounts such as 401(k)s, beneficiary designations are not automatically revoked upon divorce due to the Employee Retirement Income Security Act of 1974 (ERISA) preemption. Clients must affirmatively change their beneficiary designations unless the divorce decree specifically requires them to keep the former spouse as a beneficiary.
Empower Your Clients: The Estate Plan Is More Important than Ever
Postdivorce, your client is in full control of their financial future, but if they do not have an estate plan, state law will dictate the distribution of their assets. Existing documents need to be reviewed immediately and likely updated to align with the client’s new life circumstances. Even if some provisions are revoked by law, the “back-up plans” in their documents must be reevaluated to ensure they still reflect the client’s desires.
By incorporating estate planning guidance into your family law practice, you can offer a holistic service that protects your clients’ new futures and ensures their hard-earned assets benefit those they truly intend to benefit. This isn’t just about legal compliance; it’s also about providing peace of mind and ensuring their legacy is secure.
Encourage your clients to schedule an appointment to review their estate plan, and always remind them to bring their divorce decree. It’s the first, crucial step in building their new financial foundation.
We can help you add estate planning to your practice—attend an Estate Planning Bootcamp as the first step!
