Let’s face facts, going through a divorce is devastating. If you’re divorced, or know a family member or friend who is going through the process, then you are well aware how much impact it has on your day-to-day life. During and immediately after going through a divorce you will be dealing with a shift in identity, most likely a new place to live, navigating your new normal, trying to keep up with work, the kids, and the emotional and financial ripple effect that comes with divorce. Yet, something that is often overlooked in the midst of a million items on the to-do list is updating your estate plan (or lack thereof). For the clients we serve at our office in Oakbrook Terrace, IL, navigating these changes can feel overwhelming and it’s invaluable to have a trusted resource to provide you with the guidance needed to protect your family, wealth, and legacy.
Before we begin, in our experience, the term “estate plan” can be confusing for most. So, just to be clear, when we use the terms “estate plan,” that includes people who do, or DO NOT have a Will, or a Trust. Whether you realize it or not, we all have an estate plan – if you own a home, retirement, banking or financial accounts, then you have an estate plan – it just so happens to be the state’s default plan for you. Regardless of what type of “estate plan” you have, there are important tasks that must be addressed post-divorce. With over 20 years of experience in dealing with estate planning and family law matters, Attorney Michael Biederstadt and the team at Family, Wealth & Legacy Legal Solutions (FWLLS) are well equipped to help guide you through the essential steps to update your estate plan during, or after divorce, so that you can have the peace of mind of knowing your affairs are in order and that your assets and loved ones are protected.
How Divorce Impacts Your Estate Plan
When going through divorce, revising your estate plan is critical. Over the years, we have encountered so many horror stories of what can happen when these simple, but imperative list of tasks are left unaddressed post-divorce. Whether you have a Will, a Trust, or do not have a formal estate plan in place just yet, there are extremely important things to consider, which often go overlooked. If you fail to address these important updates, your ex-spouse may receive certain benefits, or even your hard-earned financial accounts and assets that they were no longer entitled too pursuant to your divorce decree. It’s sad, but after spending thousands of dollars and months, if not years, of your life to finalize your negotiations in a divorce, it is not all that uncommon that after someone passes away, their ex-spouse then receives property that was negotiated and awarded to you in the divorce, when they never should have been entitled to it in the first place. In the end, after your death – your family then may then have to spend a lot of money, time and stress dealing with your ex in court to try to re-coup those funds and enforce the terms of your divorce decree. That is why it is critical to take the time and effort to ensure that your estate plan reflects your new circumstances and is updated properly to ensure that your assets will be distributed as you intend. In fact, updating your estate plan must also be a priority for many other changes in your family or personal circumstances, including the birth of children, passing of family members, second marriages, or simply the passage of time as a result of changes in the law. If you’d like to read more about that topic, please read our prior article, Why Everyone Needs to Keep Their Estate Plan Updated
Updating Beneficiary Designations
The most commonly overlooked aspect of post-divorce estate planning is updating beneficiary designations. Although it an extremely easy and simple task to complete, if you forget to remove your ex-spouse as the beneficiary of a life insurance policy, pension, retirement account, or any other financial account after your death – they will receive your money. Regardless of what your Will, Trust or estate planning documents may say, the financial institution will not look to your estate planning documents in this instance because you have named a beneficiary on your account with their company and therefore, they are legally obligated to pay that beneficiary the proceeds of these accounts or policies upon receiving notice that you have passed away.
When it comes to post-divorce planning, this is the most common mistake that we encounter. If this simple task gets overlooked, it will lead to time-consuming and expensive litigation for your family after you’re gone to try to get those funds returned to them. That is why it is so important to take the time to go online, or take a trip down to your local advisor, to ensure that your beneficiaries are updated on all of your accounts. This small investment of time can prevent disastrous and unintended distributions from going to your ex, so that you can rest assured that your assets go to the people you want and intend for them to go to. Not to mention, this is an important and often overlooked area of planning that everyone should do, regardless of their life circumstances, or what “estate plan” they may have in place for their family.
Revoking Power of Attorney
If you have a power of attorney, it’s crucial to revoke any existing Financial or Healthcare Power of Attorney designations that you’ve made, which involve your ex-spouse. These important legal documents grants significant control over your financial and medical decisions, so appointing someone you trust to act in this capacity is essential to ensure your affairs are managed by the people you want, in the way that you want, according to your current preferences. So, after a divorce, make sure you get your Powers of Attorney updated as soon as possible because we never know when life may happen and your family and loved ones may need to use them.
Once again, the last thing you want is for your family and loved ones to be dealing with if you are injured or incapacitated is to have to pay a lawyer and go to court to have your ex-spouse removed from this crucial role. So, by taking the time and effort to ensure that your Powers of Attorney are updated, you can avoid this potential possibility for your loved ones.
Revising Your Living Trust
If you have a living trust, your ex-spouse is likely named as a trustee or beneficiary, if not both. Revising your trust documents and then confirming that your Trust is properly funded, is absolutely necessary to ensure that your estate plan is up-to-date and reflects who you want to manage your estate and ultimately benefit from your Trust. This will most likely involve appointing a new trustee and changing the beneficiaries to reflect your updated estate planning goals.
Necessity of Updating Your Will
Your will is another critical document that must be updated after a divorce. Your ex-spouse may still be named as the executor and the primary beneficiary. By updating your will, you can ensure that your estate is administered by someone you trust and that your assets are distributed to the people you want.
Reassessing Guardianship Designations
If you have minor children, your estate plan likely includes guardianship designations. Post-divorce, it’s essential to reassess these choices. You may want to name someone other than your ex-spouse as the guardian to ensure your children’s care aligns with your current wishes, but be careful. In Illinois, 755 ILCS 5/11-5(b) requires that a living parent is appointed as the guardian of a child, unless certain conditions are met. Most likely, you won’t be able to appoint someone other than your ex-spouse, unless you get their consent. There are exceptions in the statute, but unless their parental rights have been terminated, or they voluntarily relinquish custody, the courts will always provide children to a living parent in Illinois. If possible, the ideal situation is where you and your ex-spouse can agree on who the back-up guardians will be if something should ever happen to both of you, so that there isn’t a conflict between your respective estate planning documents.
It’s also extremely important for parents to appoint short-term guardians to protect their kids from ever facing the prospect of being temporarily placed in foster care in the event of an emergency. In Illinois, 755 ILCS 5/11-5.4 requires that both parent’s consent to a short-term guardian nomination. That is why we always recommend that our clients update their estate plan in anticipation of finalizing their divorce, or immediately thereafter, so that while they are in the midst of negotiating the terms of divorce, they can also incorporate negotiations regarding agreed upon guardian nominations for both primary and short-term guardians of their kids. Based on our experience, if you wait too long after finalizing your divorce, it will be tough to get your ex to agree and sign-off on any more legal documents. It is much easier to conduct these discussions, while you are in the midst of negotiating the terms of your divorce and you have the ability to lean on your lawyers to help facilitate these difficult conversations.
Consequences of Not Updating Your Estate Plan
Failing to update your estate plan after a divorce can lead to unintended and disastrous consequences. After all of the money, time and stress that comes along with finalizing a divorce, I’m sure the last thing you want is for your ex-spouse to inherit your assets, make decisions on your behalf, or handle your financial affairs. I realize that spending more time and money on attorney’s is the last thing you’ll want to do as you wrap up your divorce, but updating your estate plan is a necessity if you want to ensure that your wishes are honored and your assets are protected post-divorce.
Understanding State Law and Divorce Decrees
Illinois law and the terms of your divorce decree can significantly impact your estate plan. It’s crucial to have someone in your corner that understands both estate planning and family law in order to ensure that you are protected and that you have the right plan in place to protect your family, wealth and the legacy that you will leave behind. Our experienced estate planning and family law team in Oakbrook Terrace can provide valuable insights and guidance on these matters.
When to Start Updating Your Estate Plan
Don’t wait until your divorce is finalized to begin updating your estate plan. Starting as soon as divorce proceedings begin and while your case is still pending pending is a proactive approach that ensures your interests are protected throughout the process. Not to mention, that our firm is in a unique position because we understand and are experienced in both family law and estate planning. Our background allows our firm to assist in coaching and guiding our clients, while navigating both of these complex areas of the law during an extremely difficult time of their lives.
Don’t Wait for Surprises to Happen: Review Your Plan Now
Divorce significantly affects your estate plan, and taking timely action to revise your documents is crucial. The last thing you want is to leave your family with a long and expensive legal battle with your ex, simply to clean up the mess that you left behind after failing to update your estate plan. That is why it’s extremely important to get your affairs in order and update your estate plan after a divorce. For Illinois residents, seeking professional guidance from Michael Biederstadt at Family, Wealth & Legacy Legal Solutions, located in Oakbrook Terrace, IL, can make this complex process more manageable. Don’t wait until it’s too late!
Key Points to Remember
Updating your estate plan post-divorce is not just a legal necessity; it’s crucial to ensure your assets and loved ones are protected according to your current wishes. We’ve seen the horror stories play out in real life and it isn’t pretty. In order to avoid this potential result for your family, please Book a call with Family, Wealth & Legacy Legal Solutions (FWLLS) to schedule a discovery call and take the next step toward getting your estate plan updated today.