You have recently divorced your spouse and the judge has signed the divorce decree. Now what? Although you may feel as though you have spent enough time and money on lawyers, there is one last attorney you need to talk to: an estate planning attorney.  Estate planning after divorce is critical to ensure your wishes are up to date and followed in the event of your incapacity or passing.  If you and your former spouse had estate planning done together previously, it is necessary for you update your estate plan s to avoid having your hard earned money and property be distributed in a way you did not intend upon your passing.  If you have not done any planning, now is the perfect time to get your affairs in order.

When you meet with your estate planning attorney, it is crucial that you bring all necessary documents, including a copy of your divorce decree. This document will be helpful in determining what obligations need to be provided for in your documents, what accounts or property you now own, and how you own those accounts and property.

What Is in a Divorce Decree?

Support obligations

Spousal or child support obligations may necessitate purchasing life insurance should you pass away before fulfilling the entire obligation. If there is a child support obligation, it may be wise to have the life insurance policy owned by a trust allowing distributions to the minor children by a trustee instead of a lump sum payout to your former spouse, who may or may not use the funds as intended. (If this is not incorporated into your decree, make sure your former spouse agrees to this strategy!)  It is critical that your estate planning lawyer understands such obligations to ensure that the planning strategies don’t contradict your support obligations under the divorce decree.

Property Division

The divorce decree will also contain a section on the division of your marital property. This is helpful information to give to your estate planning attorney to depict an accurate picture of your current property and financial accounts.

In addition to identifying the accounts or property you now own, how you own them is incredibly important. Ownership of accounts or property previously owned by you and your former spouse as community property or joint tenants changed to ownership as tenants in common under Arizona law.  (See: A.R.S. Section 14-2804.)  This is important because before your divorce, if you had passed away, your (now ex) spouse would have likely received your interest in the account or property automatically. However, now that the ownership has changed to tenants in common, when you pass away, your interest will go to your heirs. If you don’t do any planning, the interest will be transferred according to Arizona law, which may not coincide with your wishes.  (For more information on this, read: Who Gets My Property if I Die Without an Estate Plan?)  Instead of having your property distributed according to Arizona law, by creating an estate plan you can choose who will receive your interest and how they will receive it.

What Effect Does the Divorce Decree Have on an Existing Estate Plan? 

Last Will and Testament

In Arizona, your will is still valid after a divorce, except as it applies to your former spouse.  After your divorce, any gift to your former spouse and any nomination of your former spouse to serve as your personal representative are revoked. (See: A.R.S. Section 14-2804.)  This also applies to any gift to or appointment of your former spouse’s relatives.

That said, you may not have named anyone other than your former spouse to inherit your assets or serve as your personal representative.  In such case, a will that doesn’t name any heirs or who should serve as the personal representative isn’t very helpful!  Creating a new will after divorce is the best way to ensure your plan is up to date and accurately reflects your wishes.

Disqualifying your former spouse or his or her relatives may not accurately reflect your wishes.  For example, you may want your former spouse’s relatives to serve as guardians for your minor children in the event something happened to you and your former spouse.  Or, you may want your former spouse to manage any assets left to your minor children.  In such an event, a new will would need to be drafted to add your former spouse or their relatives back in.

Revocable Living Trust

Arizona law treats living trusts similar to wills: any gift to your former spouse or their relatives and any nomination of your former spouse or their relatives to serve as your successor trustee are revoked upon divorce.  For a joint trust owning marital property, this means that each spouse will be treated as having predeceased the other.  This would mean that each spouse’s share of the trust would be distributed to the beneficiaries as if there was no surviving spouse.  For separate property trusts, the former spouse is disqualified as a potential beneficiary or successor trustee of the trust.  If you wanted to keep your spouse or their relatives as beneficiaries or trustees, you must revise your trust to verify your wishes after divorce.

Financial Power of Attorney & Health Care Power of Attorney

Upon divorce, your former spouse is automatically removed as an agent named in your financial or health care power of attorney.  However, the power of attorney is still valid as long as an alternate agent is willing to serve.

Life Insurance

Because a life insurance policy is a contract with a third party, a divorce can sometimes complicate things.  Under Arizona law, if you named your former spouse as a beneficiary of the policy prior to your divorce, that designation is revoked upon your divorce.  That said, many insurance brokers are unfamiliar with the law and if uninformed of your divorce, may incorrectly pay your former spouse even after your divorce.  In that case, even though the former spouse is no longer entitled to the life insurance proceeds, if the life insurance company was not informed, the benefit will be paid out to the named beneficiary (former spouse), and it will be the responsibility of the rightful beneficiary to sue and collect the proceeds from the former spouse.

To skip this avoidable drama, It’s best to reach out to your life insurance company as soon as you can after your divorce to update your beneficiary designations.

Retirement Accounts

The disqualification provisions of A.R.S. Section 14-2804 do not apply to retirement accounts governed by the Employee Retirement Income Security Act of 1974 (ERISA).  After divorce, the beneficiary the designation on ERISA plans is not automatically revoked. In order to ensure that your former spouse does not receive the benefits, you must act to change the designation, provided that your divorce decree does not state otherwise. 

You Need An Estate Plan Now More Than Ever

As a newly single person, you are now in full control of your money and property. Without an estate plan in place, Arizona law will determine what happens to your assets and property. If you already have estate planning documents in place, you need to review them when circumstances change, especially in the event of divorce.  Even if gifts to your former spouse are revoked under state law, you need to make sure that the alternate plan built into your documents is still what you want.  Estate planning after divorce is critical to making sure your wishes are up to date and that the right people are in charge of and inheriting your property.  Call today at 480-699-7992 to schedule an appointment to protect your new future and those you love, and don’t forget to bring the divorce decree.