Divorce Can Ruin an Estate Plan – What to Do


Just when you thought you had everything planned for your estate down to the last beneficiary designations and the age at which your children would inherit, you might find an unpleasant reality that slips in not only to wreck your day to day living but also how your assets are to be distributed if you should die – or not.

Smart individuals realize that divorce disrupts everything and your estate planning is part of everything. In the same way that divorce affects other aspects of your life deciding who keeps the house or should it be sold or custody of your children it also affects inheritances, beneficiary designations on death, and titling of assets during life to name a few. As you can imagine, sometimes mistakes are made that need correction. Here are some examples.

Titling of Assets. For couples represented by competent divorce attorneys the question of titling of the family residence is taken seriously. If one spouse receives the residence, that property needs to be retitled from tenants by the entireties into the individual name of the spouse receiving the property. You would think that would be obvious but, sometimes in haste, actions are missed. Also, in our “do it yourself” culture where spouses might try to handle their own divorce, they might forget. Suppose nothing is done, then what? On divorce if the property was jointly titled as tenants by the entireties, an ownership form only available to spouses, the property becomes owned as tenants in common. This means that each person can sell his or her individual share. It also means that if one of them dies, his or her name is still on the title. This can get awkward. We have had a few situations where former spouses neglected to take care of the title and then want to resell at a later date. Titling of other assets such as bank accounts also needs to be reviewed since joint titling of bank accounts leaves everything to the survivor regardless of intent.

Wills. If, like most married couples, you named each other as mutual beneficiaries under your Wills and then, on the death of both of you, to the children equally, you need to review your Will to make certain your assets on your death go as you want them to. Also, not all assets pass by Will. There are, for instance, pension fund designations and life insurance beneficiaries.

Pensions and Retirement Funds. If you named your spouse as beneficiary under your pension especially if it was done years ago you might have forgotten. You need to check the beneficiaries of your IRA’s, 401(k)’s, SEP’s and similar retirement funds. Did you update on divorce?

Trusts. This might be time to consider a Trust or to review, modify or revoke a Trust. If you have minor children you could consider a brother, sister or parent to manage funds being left to your children instead of your former spouse. This is one area where serious review is needed and an elder law attorney or trusts and estates attorney can help.

Powers of Attorney and Health Care Powers of Attorney. Is your Husband or Wife your agent under Power of Attorney to handle your financial affairs? That is an obvious area to consider for correction. Less obvious perhaps but extremely important would be your Health Care Power/Advance Directive/Living Will. Do you want your former spouse making life and death decisions affecting you?

Life Insurance. Life insurance is often made a planning tool in divorces. This can be especially important where there are younger children involved. Your divorce lawyer probably has covered this with you but also remember this can be the time to examine beneficiaries or to purchase life insurance for planning purposes.

Pre-Nuptual and Post-Nuptual Agreements. If you had a pre-nuptual or post-nuptual agreement take it out and review it carefully. Be sure you know your rights.

Tax Considerations. When you are no longer a couple but are filing individually are you ready for the change? You taxes might increase. It might be time to talk to an accountant or tax professional. It likely affects your tax status.

After Divorce and If You Remarry. Remarriage after divorce raises similar issues. Whether you remarry or not, you should review all of the above both before the final Decree and after your divorce to be certain the disposition of assets follows your wishes.

About the Author Janet Colliton

Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.

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