A Guide to Divorce and Estate Planning

Like everyone, you have a vision for your future, and plans for how it will unfold. Unfortunately, the prospect of a divorce throws a wrench in those plans. You may need to change course regarding a number of objectives, including your estate plan. The good news is that the overall goal of your estate planning—protecting yourself and your loved ones—remains the same. The bad news is that you will probably have to tinker with the mechanism for doing so.

Juggling two legal concerns, like divorce and estate planning, can be stressful. In this blog post, we’ll discuss what actions you should take and when, and the questions to consider throughout.

Should I File for Divorce Before I Update My Estate Plan?

In one word, no. Ohio courts typically issue a mutual temporary restraining order (TRO) when a divorce is filed. The TRO prevents both spouses from taking certain actions while the divorce is pending, such as canceling life insurance policies or changing beneficiaries, withdrawing money from investment or retirement accounts, and may prohibit changing wills and trusts. The purpose of the TRO is to prevent either spouse from transferring away property that would be subject to division in divorce.

Unfortunately, it also creates the potential for inequity. A spouse who knows they plan to file for divorce can update their estate plan beforehand. The other spouse may be blindsided and stuck with their existing will or trust while the divorce is ongoing. If the spouse who didn’t change their will dies during the pendency of the divorce, the surviving spouse who filed for divorce would inherit.

The takeaway: if you’re planning to file for divorce, call an estate planning attorney first. If you suspect that your spouse plans to file, consider doing the same.

How Does a Divorce Affect My Powers of Attorney?

Powers of attorney allow you to appoint someone else to handle your financial business or medical decisions if you can’t do so for yourself. Most people, if they are married, appoint their spouse as their agent under a power of attorney for which they are the principal.

Obviously, if you have a divorce pending, you may no longer want your spouse to have control over your finances or medical decisions if become incapacitated. The good news is that under Ohio law, if an action is filed for divorce, dissolution, or separation between an agent and principal, the agent’s power terminates. The agent’s power also terminates if the principal and agent are legally separated.

The bad news is that state law cannot name a new agent in your spouse’s place—but you can. If you don’t have an alternate or successor agent named in your power of attorney, you should execute new powers of attorney as soon as possible while your divorce is pending. Unlike a will or trust, there is no prohibition on making a new power of attorney during a divorce.

What If My Ex-Spouse Dies Before They Change Their Estate Plan?

Once your divorce is final, you are free to change any and all aspects of your estate plan (unless otherwise specified by your divorce settlement). However, most people don’t rush right out to their estate planning attorney once the ink is dry on their divorce decree. What happens if one ex-spouse dies and their will or trust names the other ex-spouse as beneficiary?

To the disappointment of any ex-spouse who was hoping for a windfall, in Ohio, an ex-spouse named as beneficiary in a will or trust is treated as if they died before the ex-spouse who made the estate plan. Any bequest they would have received passes to whoever would have received it had they actually died first.

If, for some reason, you actually want your ex-spouse to inherit from you, it is best to make a new will or trust after your divorce specifying that fact.

How Does Divorce Affect My Beneficiary Designations?

If your ex-spouse was a beneficiary of your will or trust, their right to inherit is terminated when your divorce is final, as mentioned above. If you have designated a beneficiary on an investment or retirement account, or you have a life insurance policy, your divorce terminates your ex-spouse’s beneficiary status.

Could My Kids Lose Their Inheritance in a Divorce?

Even if you’re not worried about a divorce of your own, you also need to think about the impact your child’s divorce could have on their inheritance. It’s not uncommon, for example, for an adult child to receive a substantial inheritance in a will to place those assets into an account with their spouse or use them to buy a house together. Then a little while later, or even much longer, they get divorced. Since the inherited assets have been commingled with marital assets, your child’s spouse could take half of their inheritance, or perhaps more, in a divorce.

Fortunately, you can prevent that outcome with your own estate planning. Even better, the measure you take to protect your child’s inheritance from divorce has many other benefits as well. The best way to conserve assets for your child is to place them in an asset protection trust. In a trust designed for asset protection, your child’s inheritance will be safe not only from a divorcing spouse, but from other creditors as well.

For more divorce and estate planning tips, or to schedule a consultation regarding estate planning after divorce, contact Gudorf Law Group.