When you are getting a divorce, it can seem like there are a million moving parts to manage at a time when you are emotionally drained. Child custody, property division, and reorganizing your life can be overwhelming. It can be easy for some critical concerns to fall through the cracks.
But it’s important that you don’t put off updating your estate plan. You should talk to your Maryland estate planning attorney about estate planning after divorce early in the process. If you wait to update your estate plan, your estate documents may not reflect your wishes, resulting in consequences you never anticipated. For example, your ex could end up having the power to make medical decisions for you if you are incapacitated, or they could inherit your retirement savings if you fail to change your beneficiaries.
Below is a non-inclusive list you will want to consider.
Your Will
The good news is that once your divorce is final, it will automatically disinherit your ex in the state of Maryland. However, that’s far from the only concern. For example, if your will appoints your ex as an executor of your will, your divorce alone will not change that. You must amend the will itself to make that change..
Also, it’s not the best idea to rely on the default of the law concerning who will inherit after your divorce. You will want to amend your will to specify how your assets should be distributed after your death. Please note that even though Maryland law will disinherit your ex when you get divorced, any provisions that leave assets to your ex’s relatives will not be affected.
Trusts
Divorce will not change the trustees or beneficiaries of your trusts. For example, if you appointed your ex as a trustee of a trust or made your ex the beneficiary of a revocable living trust, that won’t change automatically just because you get divorced. This can get complicated, so before you even make your spouse a beneficiary of a trust, discuss with your lawyer how you can change beneficiaries or revoke the trust if you get divorced.
Tax Considerations
How you divide your property in a divorce may affect your estate tax liability. Both Maryland and the federal government have estate taxes, but many estates have values that fall within the range of exemptions. Laws are subject to change, and exemptions may also change year to year due to indexing for inflation. Creating trusts and employing other strategies can also decrease the value of your taxable estate and save substantial assets for your beneficiaries. Your attorney must pay attention to structuring your marital property division and estate planning after divorce so you pay as little in taxes as possible.
Beneficiaries on Financial Instruments
Though your ex will automatically be removed from your will as a beneficiary, the same cannot be said for financial documents such as life insurance, retirement accounts such as IRAs or 401(k)s, bank accounts or investment accounts with payable-on-death (POD) or transfer-on-death (TOD) instructions. If your ex is the beneficiary on these kinds of instruments and you die, the assets will go to your ex. If your ex is mentioned as the beneficiary to these kinds of documents in your will and you get divorced, they will not automatically be disinherited from collecting. What really matters is the beneficiary named on the financial instruments. It’s usually pretty easy to change beneficiaries; but sometimes people forget with dire consequences.
Financial Power of Attorney
Divorce does not automatically revoke financial power of attorney in Maryland. Financial power of attorney authorizes the person you designate to handle your finances if you become incapacitated. Most people don’t want that person to be their ex, so change that as soon as possible once you decide to divorce.
Healthcare Directives
Your healthcare directives are documents such as a living will and medical power of attorney that enable the person you name to make medical decisions on your behalf if you are too sick to do so or are unconscious. You will want to immediately update these documents at the beginning of your divorce proceedings so you have the most trusted person in your life making what could be life or death decisions for you. It’s rare for someone to want that person to be an ex-spouse.
Property Titles
Be sure to review how your property is titled as if you are going through a divorce. Both real and personal property can be titled so it transfers automatically to a beneficiary or a co-owner after your death. This avoids the property going through probate. For instance, it’s common for married couples to hold title to homes as joint tenants or tenants by the entirety. You may very well need to have some property titles modified when estate planning after divorce.
When Should I Begin Estate Planning After Divorce?
You shouldn’t wait until after you divorce to begin updating your estate plan. Ideally, you should review your estate plan at the beginning of your divorce proceedings and again after your divorce is finalized. Some changes, like updating powers of attorney, can and should be made while the divorce is ongoing. Others may need to wait until after the court enters your divorce decree. Talk with your experienced Maryland estate planning attorney to develop a comprehensive plan.
Working with an experienced Maryland estate planning attorney ensures your updates are timely, legally valid, and aligned with your new life circumstances.
Final Thoughts
Updating your estate planning after divorce protects you, your property, and the people you care about most. While it may feel overwhelming, a trusted estate planning attorney can help guide you through the process step-by-step.
If you have recently divorced or are planning to divorce, don’t wait. Contact our Maryland estate planning team today to schedule a consultation.