The termination of a marriage by divorce can be devastating. While some may breathe a sigh of relief once the divorce decree is issued, others may mourn what they consider to be a tremendous loss. Regardless of how someone approaches the end of a marriage, it is important to note that a divorce does not automatically update an estate plan. Instead, following a divorce you must take proactive steps to revise your estate planning documents to ensure that your documents accurately reflect your intentions.
It is not uncommon for married couples to create mirror estate plans naming the other spouse as the primary beneficiary and appointing him or her as the primary fiduciary whether as personal representative under a will or trustee of a trust. In addition, the other spouse is often named as agent under a health care proxy and power of attorney.
Under the Massachusetts Uniform Probate Code (“MUPC”), a divorce automatically removes a former spouse (and his or her relatives) as a beneficiary under revocable documents such as a will and trust. In addition, fiduciary nominations are also revoked. Therefore, it is important to review the beneficiaries and fiduciaries in your estate plan following divorce to ensure your intentions are met. If you have named a former spouse (or his or her relative) as an agent under your power of attorney or health care proxy these documents should be revised as well.
In the event that you have minor children, it may also be important to review your estate plan to ensure that your former spouse does not have any rights or powers over your property in his or her capacity as the natural guardian of your children.
In connection with updating your estate plan, you will also need to review the titling of your assets and beneficiary designations. During the divorce process, spouses are required to divide their marital assets. If you created and funded a trust or trusts with these assets, you will need to re-fund the trust(s) with assets you own individually following the divorce. Divorce also severs joint tenancy and tenancy by the entirety with respect to real estate resulting in a tenancy-in-common ownership (meaning that each former spouse has a distinct and separate interest that would pass to his or her estate).
As mentioned above, the MUPC automatically revokes all beneficial dispositions to a former spouse from revocable documents. Although this would seem to include beneficiary designations for retirement accounts and life insurance policies, in certain cases Courts have found those provisions of the MUPC unenforceable. Therefore, these forms should also be updated following divorce.
Importantly, a divorce does not automatically remove a former spouse as a beneficiary or a fiduciary from irrevocable documents. Therefore, if you have created an irrevocable trust of which your former spouse is a beneficiary (or a trustee), a divorce will not terminate these roles. It may be possible, however, to transfer assets from one irrevocable trust to a new irrevocable trust with different beneficiaries through a process known as decanting which may mitigate this issue.
Further, in some cases you may wish to keep a former spouse as a fiduciary or beneficiary under your estate planning documents. Updated documents should be signed following the divorce to reflect this to avoid any confusion or litigation down the line.
It is paramount that changes to an estate plan comply with any orders from the Court in connection with a divorce. For example, the Court may require that you maintain a life insurance policy and name your former spouse the beneficiary until your minor child attains the age of majority. Therefore, it is important to meet with experienced estate planning counsel to make sure that your estate planning documents and beneficiary designations are properly updated following a divorce.