In life, we try to prepare for everything as best we can but this isn't always possible. Sometimes, couples go from happily married to divorced in a short amount of time and this has sadly become natural. However, what does this mean for estate planning? Unfortunately, not many people are aware of exactly what happens after divorce so we are going to break it down for you today.
The Will - Under Arizona law, the will of a divorced person remains valid but the ex-spouse will no longer qualify as a beneficiary to the estate. On the other hand, a decree of separation will not remove the spouse as a beneficiary as they will still qualify because they are still legally married. What does this mean? Right up until the point of divorce, the will remains in tact and each partner will remain as a beneficiary. However, divorce then changes this. For this reason, being ‘separated’ and ‘divorced’ is actually very different in terms of the will.
With this being said, a final divorce decree will disqualify a spouse from a fiduciary position - such as guardian, trustee, or executor. If you want to keep an ex spouse in this position, a new will would need to be drafted.
Powers of Attorney - Upon divorce, a financial or health care power of attorney will be automatically removed. However, they can be replaced if another willing agent can be found.
Living Trust - In Arizona, joint marital property trusts are treated as if both partners have predeceased the other. In individual property trusts, the ex-spouse becomes automatically disqualified as a beneficiary. Furthermore, they will no longer become the successor trustee and will no longer have the potential to fulfil this role.
Life Insurance - If you already have an insurance policy in place, any ex-spouse will be removed and disqualified as a beneficiary. However, some circumstances may require the ex-spouse to remain as a beneficiary which means that a new designation will have to be filed to the insurance company. If no action is taken, Arizona law suggests that the ex-spouse will be automatically disqualified as a beneficiary.
These are the four main documents that will be affected by the divorce process and then will need to be changed thereafter. If you aren't sure or simply need advice, the best option is always to discuss your choices with a trained professional. Although divorce is becoming ever-more common, each situation is unique so professional advice for both you and your ex-spouse could be the way forward. Once you receive this, you can ensure that all your major documents are in order and your will, living trust, power of attorney, and life insurance are all valid and ready to be put into action in the future.
Ultimately, your joint tenancy agreement, 401k, pension, profit sharing, and IRA will all also be affected by divorce so be sure to get advice to keep your finances in order.