The consequences of leaving no will can be particularly significant following a divorce or breakup. In the ensuing havoc, many persons forget to create a will to ensure that assets and decisions are taken out of the hands of the former spouse and the former spouse’s family. But consider the consequences of leaving no will after your breakup—or of having your will declared invalid because it was improperly prepared or is not admissible to probate:
- People you dislike or people who dislike and ignore you may get some of your assets or control assets. If you are not yet divorced and die without a will, under the uniform probate code your spouse will receive 100 percent of your estate if all the children are from the same relationship. State law determines who gets assets, not you.
- If you have minor children, the county surrogate will hold the child’s money until age 18, and it is difficult and time consuming to petition the surrogate to release funds for payment of tuition, medical bills, clothing, etc.
- Additional expenses will be incurred and extra work will be required to qualify an administrator-surety bond.
- You lose the opportunity to work with your attorney to try to reduce estate tax, state inheritance taxes, and federal estate taxes.
- A judge determines who gets custody of minor children. A greedy brother or crazy mother-in-law could ask the court for custody. The parent of your children may try to control the assets of your children and not properly spend the money.
- It probably will cause fights and lawsuits within your family.
Only with proper planning and guidance from a qualified attorney can you make sure your assets go to your loved ones or favorite charity—not your “ex.”
Steps to Take after a Breakup
I advise my separated or divorced clients to do the following:
1. Have an estate planning law attorney prepare a will to distribute your assets to the people you care about the most. If you already have a will, prepare a new will and have the old will revoked. (Although state law in many jurisdictions removes the ex-spouse as a beneficiary, it does not necessarily remove the ex-spouse as executor or prevent the ex from receiving assets under a bank account set up as a payable-on-death or joint account.) Usually a new executor will be selected who will also serve as the funeral agent. You also can create specific bequests so jewelry or family heirlooms go to a selected child—otherwise the executor can just sell them at the pawn shop. Should you choose to do so, you can direct in your will that a child be excluded from inheriting (for example, if the child has testified against you in divorce court).
Don’t ever settle for a cheap online form. Self-prepared documents often are not filled out correctly, are not witnessed correctly, and are not admitted to probate. I could change the oil in my car or repair my lawnmower, but I now prefer an experienced mechanic do these tasks. When preparing estate planning documents, turn to an experienced attorney who will do it right.
2. Prepare a power of attorney to select someone to handle your finances if you become disabled. Again, if you had a power of attorney created before your breakup, have it revoked. This means your attorney or you should send notices to banks and your accounts to indicate the prior power of attorney is invalid. If you have children over age 18, have your attorney prepare a power of attorney for these children so the custodial parent can still have access to their records and pay their bills if they are in an accident.
3. Select a new beneficiary on assets you may own, such as stocks, transfer-on-death brokerage accounts, bank accounts, individual retirement accounts (IRAs), retirement accounts, 401(k) accounts, payable-on-death accounts, and other financial assets. Make sure you see the actual change in beneficiary in writing. Don’t rely on a phone call from the company stating that accounts are revised. Even if a court-approved divorce decree states that a beneficiary should be changed, make sure you have changed the beneficiary designations. Remember: A new will does not change account beneficiaries on non-probate assets.
Change passwords on all online accounts and notify the service providers in writing that the former spouse is not permitted access to records.
4. Change your beneficiary under your own life insurance, whether whole life insurance or term insurance. Again, don’t just rely on language in a divorce decree to make sure your wishes are followed. If the ex-spouse is required to obtain life insurance to pay to you or your children, see proof of the insurance in writing with beneficiary designation.
5. Contact your employer’s human resources department and change the beneficiary on your pension, stock options, life insurance, and other employee benefits. Note that if you are not yet divorced, your spouse may have to sign a written waiver permitting you to change beneficiaries.
6. Keep your personal papers at a location where an ex-spouse or a child’s parent can’t steal or destroy them.
7. If you have minor children, designate someone under a will to serve as guardian to the children. Although the surviving parent obviously has first right of custody, he or she may not even want custody. Perhaps you do not want your former in-laws to have custody of your children or access to your children’s money. A new will specifically informs a surrogate and probate judge of your wishes. If there is no will, a judge can only guess.
Also set up a trust in the will so children and grandchildren receive funds when they are 21, 25, and 30 years old. This will preserve money for their college and necessary expenses. Don’t just leave them with a windfall (which they can use to buy an expensive car) when they turn 18. How many 18-year-old kids would spend such a large amount of money wisely? And don’t make minor children the beneficiaries of big life insurance policies because the minors will automatically receive the entire sum when they turn 18. Instead, make your estate the beneficiary of life insurance and other accounts.
Another advantage of trusts: They protect beneficiaries if there is a lawsuit and judgment against them. Once again, seek assistance of an estate planning attorney when setting up such a trust; don’t try to do everything yourself.
8. Make sure the trustee for any funds designated for your children is the “right” trustee. The former in-laws may no longer be the best choice.
9. Re-title real estate, cars, and other assets in joint names. Usually a new deed will have to be prepared. If there is a mortgage, either a refinance or consent of the mortgage company will be needed to remove your name from the mortgage. (Good luck with that.)
10. In many states, such as my home state of New Jersey, if you are still married and living with a spouse, the surviving spouse under certain circumstances has a right to “elect against the will”—and obtain one-third of the estate. Your attorney can explain how you can protect yourself and your children.
11. Have a new living will, advance directive for health care, or medical proxy prepared to remove the ex and select a trusted family member or friend to carry out your end-of-life medical wishes. The living will should contain new HIPAA language to advise doctors and the hospital who should have access to medical information. You don’t want an estranged person to be able to make medical decisions or “pull the plug.” A divorce decree does not remove the ex-spouse listed on the medical power of attorney or living will. A new living will must be prepared.
It is important to prepare new documents if separation has started or is inevitable because you do not want your soon-to-be ex to make financial and medical decisions for you. Some clients are not aware they can have a new will and other estate planning documents prepared prior to a formal divorce decree. To the contrary, our office drafts wills for individuals in marital difficulty who want to protect their assets and children in the event of an unexpected, sudden death prior to the finalization of a divorce. Persons can create a new will and can confidentially revoke a power of attorney, living will, trust, etc., without telling their spouse. You also can select a funeral agent so your estranged spouse does not handle funeral arrangements.
As noted above, however, if spouses are living together at the time of one spouse’s death, the surviving spouse in many states can elect against the new will and obtain one-third of the augmented estate. (See Uniform Probate Code 2-201.) Also, a spouse typically cannot be removed as a beneficiary under pensions without that spouse’s written consent.
Further, the original attorney cannot prepare new documents if the attorney also prepared documents for the other spouse. The original attorney in some states may be required to notify the other spouse. Therefore, a new, independent attorney is suggested whose only loyalty is to you.
Ask your attorney whether you can take out 50 percent of assets in a joint account and deposit them in a new account payable on death to adult children, not the estranged spouse. And if you own a small business, prepare a contingency plan for someone (other than your estranged spouse) to run your business should you become disabled.
If you decide to get remarried, have your attorney prepare a prenuptial agreement so your children can inherit your assets, rather than your new spouse, if that is your wish. In many states, persons put their assets into trusts for the benefit of a child. However, if the trust is revocable, Medicaid will include the trust assets as available money. In blended families, irrevocable trusts are useful because a will can be revocable by a competent person without telling his or her spouse.
Estate Planning to Protect Children
There may come a time when an unmarried parent is unable, owing to physical or mental incapacity, to take care of his or her minor children. If a parent dies, the minor children will need a guardian. In these circumstances, those caring for the children will need direction—as will the courts. By writing and executing a will that includes instructions on guardianship, a parent may select someone, either individually or jointly, with the legal authority to act for minor children and assume control over the assets of the children. Estate planning, which includes the execution of a will, is just as important for persons with minor children as it is for senior citizens.
Guardian. Most individuals appoint the other parent to act as guardian of the person and property of their minor children. Your will should include a clause that, in the event the other parent predeceases you or is unsuitable or ceases to act as guardian of the person and property of your minor children, appoints a trusted family member or close friend to act as successor guardian of the person and property of your minor children.
Trustee for funds. Select a trusted person, your close relative or friend, who will invest and hold your children’s money. If divorced or unmarried, most people do not select the other parent. In your will and trust you can instruct the trustee to apply amounts of income and principal as the trustee, in his or her sole discretion, deems proper for the health, maintenance, education, welfare, or support of your children or other minors. Direct that the trustee shall accumulate any income not needed for the above purposes, paying and transferring the portion held in trust to the beneficiary upon his or her attaining the age of majority or whatever age you select.
Even if your divorce is amicable and you wish to have your ex-spouse be trustee of a trust for your children (and/or executor of your will), you still should have new estate planning documents drafted and executed after the divorce to confirm your wishes.
Although the foregoing discussion contains possible items to be discussed with your family, attorney, and executor, this article is by no means exhaustive. A number of these items may not be applicable in your situation, and probably there are many others not mentioned here that are applicable. The essential element is to spend some time now considering what you should tell those most closely associated with you to facilitate their handling of your affairs upon your death.