Effect of Divorce on Wills, Trusts, and Estate Plans

Divorce is a permanent legal action that affects more than just a couple’s relationship status. One area affected by divorce is the couple’s estate planning including wills, trusts, and other estate planning tools. Estate planning is the process of preparing and describing what will happen to all of a person’s assets should he pass away.

Divorce and Wills

Many states, such as California, Texas and Arizona, have laws that prevent ex-spouses from collecting on an inaccurate will. Some simply act as though the ex-spouse is already deceased, while other states simply cross out the provisions and move to the next names on the list. The court will only apply these principles however, if the will is probated through the court. If the will is simply dealt with privately, there is no guarantee that these provisions are honored. Additionally, some states with this presumption, such as Pennsylvania, offer a means for the divorced spouse to challenge the will and request a legal share. This challenge is impossible once a new will is written and the old will revoked.

In a few states, if a couple made a will while married and then divorced without changing the will, the will is still the guiding instrument should either person pass away. So, if a wife left everything to her ex-husband while they were still married, then it would still pass to her ex-husband. In other states, provisions in the will for the ex-spouse are invalidated as of the date of the divorce. Therefore, if an ex-spouse dies after a divorce without changing the will, gifts in the will in favor of the remaining ex-spouse would be distributed according to alternative dispositions in the will or according to state intestacy laws. While the person’s intent can and likely would be challenged by the remaining family, the confusion can tie up the probate for an unnecessary amount of time.

Either way, it is not unlikely that the intent of the deceased party will not be followed where a divorce and then a death occurs prior to changing the will. The best way to ensure assets are properly transferred after a divorce is to simply redraft a fresh will. Because this is a second drafting of a will, it is important to include a revocation clause in the will specifying that the previous will is revoked. Most states also require that all copies of the old will are destroyed. Once the new will is drafted and signed, it becomes the only legally binding will that will direct any and all inheritances.

Divorce and Trusts

Trusts are a complicated matter even without divorce. The type of trust established and the intent of the trust will dictate whether the trust must be entirely revoked and redrafted or whether it can simply be updated. If the trust created by a couple was an irrevocable living trust, then it cannot be changed—regardless of the divorce. An irrevocable living trust is a trust where all the assets are transferred and all control signed over to the trustee immediately. The reason is that the trust has already gone into effect and the trustee is in charge of the trust.

In most cases, irrevocable trusts set up by married couples are meant to benefit the children. If this is still the intent and neither party has access to the trust, then there is no harm done. In the event that either party has access to the trust and may abuse that access, the court may grant instructions specifying that the trust is closed to the parties and that only the beneficiaries may benefit from it. This document is then given directly to and honored by the trustee.

If the trust is revocable, meaning the couple still has control over the trust assets, then the couple can amend the trust with their desired terms or dissolve the trust and remove the assets. If the trust is dissolved, then the assets must be listed in the couple’s divorce papers and any applicable income taxes paid. Trusts and inheritances designated to a specific spouse from another’s will or trust will go to the designated person. If both people were listed, then the inheritance must be included in the marital assets and divided equally.

Divorce and Advanced Directives

Other common estate planning documents that should be examined and changed after divorce are living wills and  health care powers of attorney. Typically, most married couples select each other for this purpose. In the event of a divorce, the previous paperwork must be revoked and a new living will drafted. In order to ensure that the new living will is understood as your intent, it is wise to give a copy to your physician to keep on file and if your state allows, file a copy with the state.

Case Studies: Managing Estate Planning After Divorce

Case Study 1: Wills and Divorce

John and Lisa recently divorced, but they had not updated their wills prior to the separation. In John’s will, he had named Lisa as the sole beneficiary of his estate. Without making any changes, his assets would pass to Lisa upon his death. To ensure that his assets go to his intended beneficiaries, John promptly revises his will after the divorce.

He removes Lisa as the beneficiary and designates his children instead. By updating his will, John ensures that his assets are distributed according to his wishes and not inadvertently passed to his ex-spouse.

Case Study 2: Trusts and Dissolution

Sarah and Michael had established a revocable living trust during their marriage. The trust contained their combined assets and was intended to benefit both of them. After their divorce, Sarah and Michael decided to dissolve the trust. They consult with their respective attorneys to draft the necessary legal documents.

As part of the dissolution process, the assets in the trust are identified, valued, and divided according to the terms of their divorce settlement. Dissolving the trust allows Sarah and Michael to sever their financial ties and distribute their assets as determined by the divorce proceedings.

Case Study 3: Advanced Directives and Healthcare Powers

During their marriage, David and Emily had executed healthcare powers of attorney designating each other as their healthcare agents. However, following their divorce, they recognized the need to update these documents. Both David and Emily revoke their previous healthcare powers of attorney and create new ones.

They select new individuals to act as their healthcare agents, ensuring that their medical decisions will be made by trusted individuals who are aware of their current wishes. By revising their advanced directives, David and Emily maintain control over their healthcare decisions and ensure their desires are followed.