Divorce makes so many impacts on your life and finances, but estate planning can be an easy one to overlook. However, divorce marks a need for estate plan overhauls, from your will’s beneficiaries to who holds your power of attorney.
Here are things to consider before, during, and after your divorce.
The effects of divorce ripple throughout your life, finances, and estate planning
Whatever stage your Oregon divorce is in, here are some general things to keep mind:
- Death provisions in divorce agreements can have impacts on either party creating or modifying a revocable trust.
- Review accommodations for minor children, especially for compliance with divorce provisions.
- Under Oregon law, divorce can automatically revoke certain provisions of a will. These can include a former spouse being named as an estate’s personal representative, if the divorce judgment is worded correctly.
- Beneficiaries under life insurance, investment accounts, and other legal and financial instruments do not change until modified or revoked by the account holder or authorized representative. This includes payment-on-death (POD) and transfer-on-death (TOD) accounts.
- Life insurance policies required by the divorce judgment need to be set up appropriately and the divorce judgment should provide protections for the beneficiary.
- Review business assets, such as ownership shares.
- Update and/or revoke general and medical powers of attorney.
- Deeds, titles, and other documents may need review and updating.
As with many things in divorce, timing matters. You may be able to manage or execute some changes before filing a divorce or while divorce is in process. Other changes may have to wait until the divorce is final.
Before filing for divorce
When possible, consult with an attorney prior to filing for divorce. This is a difficult time. But the sooner you begin talking with an estate planning lawyer, the better plans you and your attorney can make to take this life change into account.
For example, prior to filing for divorce, consider changes such as:
- Modify your designated decision-maker for medical situations where you are too injured or incapacitated to make medical decisions for yourself.
- Update your power of attorney. Name a new authorized person to manage your finances or other aspects of your life in the event of your incapacitation.
- Examine your will for changes you may want to make.
- Hold a trust with your spouse? The advice of an attorney can prevent violations of the trust or actions which may result in an asset restraining order on you and/or the trust.
- Review accounts and property for assets that may need to be transferred to new accounts or ownership.
- Review financial or property gifts and inheritances. Oregon law may call for their apportionment in the divorce settlement.
In Oregon, you can revoke your current will and execute a new will while a divorce is in process. You can also change your medical and general powers of attorney. Prior to filing for divorce, it can also be beneficial to establish a revocable living trust for holding your assets. Discuss these things with your soon-to-be former spouse. That can prevent you violating any restraint imposed by court during the divorce proceedings.
During your divorce
Once you’ve formally filed for divorce, many estate plan changes may have to wait until the divorce is final. For example, you can set up a revocable living trust before or during your divorce. However, you won’t be able to transfer assets to the trust until after the divorce process has completed.
During your divorce, what is your main estate planning concern? It’s to ensure that your living will (also known as your advance medical directive) decisions and designations are in order. Does your soon-to-be former spouse hold a power of attorney for you? You can change that designation to someone who you are more certain will reflect and carry out your wishes.
Some people in the midst of divorce proceedings also establish a pourover will. If you die while the divorce is in progress, your assets transfer into your trust upon finalization of the divorce.
It is important to discuss with your divorce attorney provisions to protect you if you are the beneficiary of a life insurance policy that your soon-to-be former spouse owns. If the former spouse terminates the policy on his or her life, or causes the policy’s termination in violation of the divorce judgment, and then passes away, the beneficiary spouse will find it hard to collect the money from the former spouse’s estate.
Additional protections can be put in place through estate planning mechanisms like an Irrevocable Life Insurance Trust. Another option? Cost shift the policy. This way the beneficiary spouse owns the policy, and the former spouse contributes funds to the owner to reimburse premiums.
After your divorce is finalized
While your life will be different after your divorce, you will also be free to make whatever legal modifications you want to your estate planning instruments, whether that’s to your will, your trust, your accounts, or other assets.
Now that your divorce is finalized, you can take a fresh look at your estate plan as well. This is a good time to review your estate documents: Do they still reflect your wishes?
One consideration? Ensure that assets passing to minor children are set up in a way that works for you. For example, if you do not want your former spouse to be able to manage or control assets meant for your children, you’ll want to consider consulting with an estate planning attorney to account for that oversight accordingly. This is also a good time to update guardianship designations for minor children.
The period after your divorce is finalized is also a good time to review and update your beneficiaries on life insurance policies, annuities, and other accounts. Regardless of your marital status, the asset will transfer or pay out to whoever the named beneficiary is—even if that’s still your former spouse.
Divorce is a life change that also means big changes to your Oregon estate plan
Divorce is not an easy time. With so much to take care of, it can be easy to forget about updating your estate. However, with the help of an experienced estate attorney, updating your estate plan before, during, and after your divorce can be an integral way to set yourself up for peace of mind in this new chapter of your life.