Divorce Considerations for Massachusetts Estate Plans
Going through a divorce is an important time to revisit your estate plan. Whether you prepared your estate plan before or during your marriage, there are a number of provisions that potentially need to be changed, and not updating your plan could result in undesirable consequences during your lifetime and at the time of your death.
7 Ways You May Need to Modify Your Estate Plan After a Divorce
Many people are surprised to learn that getting divorced does not automatically “update” their estate plan. Although a divorce in Massachusetts will remove your ex-spouse as beneficiary under a Will or trust, this simply may not be enough. It is not often, but there are occasions where ex-spouses still may want to provide for each other at their deaths. Or, you and your ex-spouse may have created a joint trust during your marriage, or your trust(s) incorporated estate tax savings strategies that are no longer effective. You may have provided for your ex-spouse’s family or incorporated them into your plan.
Your estate plan needs to be analyzed and updated after a divorce, as it is likely the strategies you put in place while married, no longer work now that you are divorced. It’s likely time to make some changes.
1. Modifying Your Beneficiaries
First, as shown in the example above, it will be important to update your estate plan. And although the law will effectively disinherit your ex-spouse under your Will or trust, it does not automatically update your beneficiary designations! If you designated your spouse as the beneficiary of your 401(k) and other accounts outside of your estate plan, these designations MUST be updated as well. While some estate planning tools will include remarriage protections (more on this below), getting divorced is a good time to reconsider your priorities regardless of any “fallback” provisions that may apply.
2. Modifying Your Health Care Proxy and Power of Attorney
If your ex-spouse is named in your Health Care Proxy, Power of Attorney, or other incapacity-planning documents (as is often the case), these documents may also need to be revised. Even if the documents accounted for the divorce from your spouse, you may have named a family member of your ex-spouse to serve in some capacity, and this could no longer be desirable.
3. Providing for Your Children
When you are married and you die unexpectedly, your spouse takes sole custody of your children. When you are married and you and your spouse both die unexpectedly, the guardianship provisions of your estate plan come into play. But, what happens when you are divorced and you are suddenly unavailable to care for your children? This is a tricky and sensitive issue that requires careful planning and a clear understanding of your parenting time rights pursuant to the terms of your divorce.
4. Terminating Joint Planning Tools
Did you and your spouse prepare a joint estate plan? Did you prepare “mirror” wills or a joint trust? This is a common estate planning practice; and, while it works well for couples as long as they stay together, it requires both spouses to make changes in the event of a divorce.
5. Trust Re-Funding
As part of the divorce process, spouses must divide their marital assets according to their separation agreement or the judgment imposed by the Court. If, as a result of dividing your marital assets, you no longer own assets you used to fund a revocable or irrevocable trust, then you will need to re-fund your trust (or trusts) with assets you currently own.
6. Tax Planning and Cost Mitigation
Married and unmarried individuals are subject to different tax rules under the federal Internal Revenue Code (IRC) and Massachusetts’ tax laws. If you based your tax planning on your joint assets and income, you may need to make changes in order to minimize your estate’s potential tax liability after your divorce.
7. Adding Remarriage Protections
Finally, with the benefit of hindsight, you can incorporate remarriage protections into your newly-revised estate plan. While it is a good idea to take a fresh look at your estate plan after any type of significant life event, it is equally wise to proactively address potential contingencies as well.
Speak with a Cambridge Estate Planning Lawyer at Eckert Byrne LLC
Are you going through a divorce or recently divorced in Cambridge, MA? If so, our attorneys can help you make the necessary changes to your estate plan and explore additional opportunities to maximize the benefits of the estate planning process. To schedule a confidential consultation at Eckert Byrne LLC, please call (855) 743-3136 or request an appointment online today.