At Gomez Edwards Law Group, we serve clients in the areas of family law, divorce, mediation, estate and estate planning. So, we are often well aware of how certain legal matters can impact others—in this case, how divorce impacts estate planning.
Estate planning tends to become a low priority during a divorce proceeding and it’s easy to see why. We realize that you are focusing on separating your life from your ex-spouse, caring for the needs of your children, and caring for your own mental and emotional needs. For this reason, we want to provide you with some quick tips and things to keep in mind as to how your divorce may impact your estate plan.
Automatic Temporary Restraining Orders
In California, at the start of every divorce case, an Automatic Temporary Restraining Order “ATRO” immediately goes into effect. This restraining order isn’t what we typically think of where one person is prevented from having contact with another. Instead, this restraining order primarily concerns the action of the parties in relation to the management of property, assets, and debts of the parties during the divorce proceeding. The primary goal of the ATRO is ensuring that the general status quo of the property is maintained. For example: neither party can unilaterally sell property, take out a second mortgage, liquidate or transfer assets, remove each other from health insurance policies, or change beneficiary designations.
The ATROs are important because they limit what and how much estate planning can occur while a divorce is pending.
Immediately Create or Update the Documents You are Authorized to Update
Not all estate planning documents govern the beneficiary of assets upon death. A health care directive and power of attorney are two documents that can and should be updated as quickly as possible after initiating a proceeding for divorce. Even more important, if you do not have these documents, it would be wise to create them as soon as possible.
Health Care Directive: this document allows you to identify who you want the doctors to speak with, and who you authorize to make medical decisions for you, in the event that you cannot communicate about your medical care.
Without a health care directive, doctors will default to speaking to your next of kin. Essentially, your next of kin are your closest living relatives. While you may have a divorce pending, you are not divorced until you receive the final filed judgment. This means that your spouse is still legally considered your next of kin up until the time your divorce judgment is filed and finalized. As such, there is a high possibility that the medical professionals will communicate with your soon to be ex-spouse should you find yourself in a situation where you cannot communicate with the doctors about your medical care.
The only way to guarantee that your spouse is not considered next of kin for the purposes of making medical decisions is to create a health care directive and identify the individual(s) you do want making medical decisions on your behalf.
Power of Attorney: this document allows you to identify an agent who is authorized to act on your behalf in regards to managing your assets. This person is not a stand-in for you, but is able to communicate with financial advisors, or take asset management actions when and as you direct them to. Typically spouses will name each other as their agents. If you have done this, it is best to revoke your existing power of attorney and create a new one identifying a new agent.
Revoke Your Existing Trust
Revoking your trust is something that can only be done by agreement. Depending upon the specifics of your trust documents, there may be reasons not to revoke your trust prior to your divorce being finalized; however, the best way to decide this will be to communicate with your ex-spouse and set up an appointment with your estate planning attorney.
While the ATROs are in place, they are designed to prevent either person from making unilateral decisions regarding the management and disposition of property. This limitation does not apply when both parties are in agreement as to how property should be managed. This means that if you both agree to revoke your trust, you absolutely can. Setting up an appointment with your estate planner to discuss the revocation and any consequences is the next step in confirming if this action is right for you.
Create a Will
The ATROs do not prevent you from creating a will. With a new will you will likely want to remove your ex-spouse from serving as the executor of your estate. You can also identify the beneficiaries you want to inherit your estate. A will also allows you to identify who you would want to serve as guardian of your children under age 18 should you pass away. The surviving parent most often continues to be the sole provider for the children; however, if your divorce includes a domestic violence restraining order, if the judge finds that the other parent is abusing substances and poses a danger to your children, then nominating a guardian in your will is important.
Get Prepared to Create a New Trust
To have an effective trust, you must sign the trust document and then fund the trust (title assets in the name of the trust). While in California you cannot fund a new trust until your divorce is finalized, you can still set it up and have it ready so that once the judgment is complete, the new trust exists and is ready to be funded. Alternatively, it is a good idea to contemplate who you want serving as the successor trustees of your trust and whether or not you want to keep the same beneficiary designations.
As mentioned above, you cannot change your beneficiaries while a divorce is pending unless your spouse explicitly agrees to this change. Sometimes parties will mutually agree to change beneficiaries to the children, but more often than not, parties do not attempt to modify beneficiary designations while a divorce is pending. That said, it is completely valid and reasonable to contemplate who you want listed as your beneficiaries once the divorce is finalized. This allows you to plan ahead and be prepared to make the change as soon as you are legally authorized to do so.
Consult with an Estate Planning Attorney
The key takeaway from this article is: consult with an estate planning attorney – preferably an estate planning attorney that does not also know or in any way work with your spouse. Each individual has unique needs and will have unique estate plans. Talking to an attorney about your specific facts and circumstances will help ensure that you receive advice tailored specifically to your needs. While a divorce limits your options in quite a few ways, there are ways that creating temporary changes to your estate plan can help support you through the divorce process.
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