So, your divorce is final. What next? For starters, you need to update your estate planning legal documents. Do you really want your ex-spouse (or his or her family) to inherit the assets you were able to keep?
I did not think so.
This issue was the subject of a recent MarketWatch article, titled “Just divorced? Don’t forget to separate your estate plans.”
The article, first reported in The Wall Street Journal, reports that lawyers in New York are citing a recent court case as an example of how not to plan your estate. In that case the family of Robyn Lewis, who died five years ago at the age of 43, has been fighting with her former in-laws.
It seems the in-law stand to inherit a $200,000 home ... even though she and her husband divorced eight years ago.
It seems Lewis executed a will in 1996, naming named her then-husband to receive her property after her death. The property included a home that had been in her family for generations. In her will she designated her then-father-in-law as the secondary beneficiary.
Problem.
New York’s probate laws stipulate that a divorce automatically cuts out the ex-husband from a will. So far so good. However, the laws do not cut out the secondary beneficiary—in this case, Robyn’s ex-father-in-law.
He brought a copy of the 1996 will to the court.
Robyn’s family claims that she wrote a new will after her divorce that changed the beneficiaries. Unfortunately, they cannot find it to prove the change. As a result, last year a New York appellate court decided to uphold the 1996 will.
Lawyers for the Lewis family are appealing.
The lesson here is to stay on top of your estate plans.
For Robyn (before she passed) and her family, it means drafting that new will and making sure key individuals have a copy or know where to find it. Be certain all of your estate planning documents clearly state your intentions, especially when you experience a major life event. Like divorce.
This means not only your updating will, but also your power of attorney and advance health directive.
Divorcing couples who have used an estate planner are counseled to work individually with a new attorney to avoid conflicts.
A qualified estate planning attorney will ensure that new documents designate the correct individuals and state that they revoke and replace the older documents. Remember, beneficiary designations also should be reviewed and changed. The proceeds from these accounts and policies pass directly to the named individuals, regardless of what a will may say.
The original article suggests that you obtain written confirmation from an insurance company that they received and made your beneficiary changes.
In addition, IRA money can be divided and rolled over into separate accounts by sending a letter to the plan administrator with proof of the divorce. Qualified retirement plans, however, such as company-sponsored ones, take a little more planning. Speak with your attorney about how to go about doing this because it involves a court order called a Qualified Domestic Relations Order. This gives you the right to a portion of the spouse’s 401(k) or other qualified-plan assets, pursuant to the divorce settlement.
As you can see, there remains much to be done once the divorce is final.
Be sure you consult experienced counsel to help you navigate potential hidden land mines. It can be dangerous to discover them on your own.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
Reference: MarketWatch (The Wall Street Journal) (February 23, 2015) “Just divorced? Don’t forget to separate your estate plans”
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