What is the effect of divorce on your estate planning documents? Many people believe that after finalizing a divorce, their documents are no longer in effect. Unfortunately, the effect of divorce on your estate planning documents is more complicated than that.
Divorce Does NOT Void Estate Planning Documents
To begin, divorce does not automatically render your documents null and void. Instead, there are specific provisions in the Texas Estates Code, Property Code and Family Code that decide what happens and how your documents should be interpreted. Below is a simplified explanation of what happens to some of your core estate planning documents:
Former Spouse Named in Your Last Will and Testament or Revocable Living Trust
If a former spouse is named as a beneficiary in your Will and Trust, and the Will or Trust was executed prior to your date of divorce, Texas law will treat that ex-spouse as having predeceased you. In that case, your estate would pass to your contingent beneficiaries under the Will or Trust. This could work out for you if you have children with your former spouse and they are your contingent beneficiaries. It will not work out if you have (1) *remarried and want to specifically include that spouse in your planning or (2) named contingent beneficiaries you no longer wish to include.
Perhaps even more disturbing is the result of naming your ex-spouse as a fiduciary (such as the Independent Executor of your Will or Trustee of your Trust). In this case, your ex-spouse is again treated as having predeceased you, but if you named someone such as a former mutual friend as a successor Executor or Trustee, your designation is still in place and that person would be named to serve as your fiduciary. So your former spouse’s best friend could be in charge of taking your Will to court, gathering up all of the assets in your estate and setting up and managing the trusts for your children. Scary?
*The law does provide certain protections for a future spouse who is not mentioned in your old estate planning documents, but it would be important to update your documents rather than allowing the State of Texas decide what your current spouse inherits.
Former Spouse Named as Your Agent in Your Powers of Attorney
Much like the law treats designations under a Will or Trust, if you have designated an ex-spouse as your financial or medical power of attorney, your ex-spouse will be treated as having predeceased you and the next named agent will be authorized to serve. Again, if you named someone such as a former mutual friend, and that person is no longer a trusted friend of yours, you will have to actively revoke the appointment and sign a new power of attorney to name a new agent. Otherwise, that could be who the banks are authorized to speak with regarding your finances and doctors are supposed to take directions from re: medical decisions.
Naming an Ex-Spouse as a Beneficiary or Agent
What if you remain on great terms with your ex-spouse , who is also the parent of your children and remains someone you want to keep as a beneficiary or agent? You must restate and resign your documents in order to keep such designations in effect after divorce.
It is important to review and update all of your estate planning documents, including your Will or Trust, powers of attorney and various beneficiary designations during or soon after finalizing a divorce to make sure your estate ends up where you intend for it to go. Not updating these documents does notautomatically render the entire documents null and void; instead, they would remain valid but would be interpreted differently by the courts, and often the interpretation is not at all what you imagined.