How Divorce Can Affect Estate Planning

When you’re going through a divorce, one of the last things on your mind is how your divorce affects your estate plan. But estate plans aren’t “set it and forget it” documents, especially when a divorce is taking place. 

While you probably already have more on your plate than you want, taking some time to update your estate planning documents can help you reduce your stress, protect your long-term goals, and ensure that your wishes are clear.

The impact of divorce on existing estate plans

When a marriage dissolves, a significant shift occurs in the married couple’s legal and financial landscape. New Jersey has statutes in place to automatically adjust estate planning documents after a divorce. These laws provide some protection by revoking any provisions in previous wills in favor of the ex-spouse.

According to New Jersey Statutes 3B:3-14, divorce or annulment automatically revokes any dispositions or appointments of property made to the ex-spouse in an estate planning document, unless stated otherwise. The same applies to any provisions conferring power of attorney or fiduciary responsibilities to the ex-spouse.

The law also transforms the interests of the ex-spouses in jointly-held property, converting them into tenancies in common. However, if your estate plan contains language that could bypass this law, it will remain unaffected.

In general terms, here’s what happens:

1. Automatic revocation: Upon divorce in New Jersey, any part of your estate plan favoring your ex-spouse is automatically canceled.

2. Former spouses treated as predeceased: In estate documents, an ex-spouse is considered as if they passed away first, which changes how your assets are distributed.

3. Reinstatement if remarried: If you remarry your ex, the revoked parts of your estate plan will be effective again.

While New Jersey-specific statutes automatically reduce some of the rush to update estate planning documents, it’s still important to take proactive measures to address your new circumstances. 

What documents do I need to update?

When updating your estate plan after a divorce, various documents may need revision. A few examples include your last will and testament, trust, living will and advance directive for health care, and power of attorney for financial affairs. 

(One key note here: as you update your estate planning documents, any updates should be consistent with the obligations in your Marital Settlement Agreement or Divorce Judgment.) 

Wills and trusts

Post-divorce, you may need to adjust your last will and trust to ensure your ex-spouse does not inherit your assets. If these documents are left unchanged, your ex-spouse’s relatives will also be treated as if they predeceased the divorce, and the property will pass to the next eligible beneficiary.

Advance directive for healthcare

Following a divorce, New Jersey law (Statute 26:2H-57) automatically revokes any appointment of an ex-spouse as a health care representative in an advance directive, except when stated otherwise in the directive. To ensure your healthcare decisions are in trusted hands, it’s essential to update this document if you haven’t yet designated a new representative.

Power of attorney

Typically, a power of attorney document is restricted from allowing an agent to transfer the principal’s property to themselves or their relatives unless explicitly permitted by the document. This limitation remains unaffected by divorce, emphasizing the need for careful consideration when appointing an agent, especially in marital or partnership contexts.

Additional documents to update

The documents mentioned above are the key ones to address, but there are other estate planning documents you’ll want to check on, including:

• Beneficiary designations: In New Jersey, a divorce decree doesn’t automatically void your beneficiary designations on life insurance policies or retirement accounts. As such, it’s important to update these documents.

• Guardianship designations: If you have minor children, reconsider guardianship choices; while your former spouse would most likely obtain custody if you passed away first, what would happen if they pre-deceased you?

• Property titles and deeds: Ensure real estate and property titles reflect current ownership.

• Business succession plans: Review and update if you own a business.

Updating these documents will help ensure your estate plan aligns with your current life situation and intentions after a divorce.

What if your child gets divorced?

If your child gets divorced, it could potentially impact the distribution of your estate. 

If your child’s ex-spouse is listed as a beneficiary in your estate plan, their entitlements would likely be revoked following a divorce unless your estate plan specifies otherwise. In other words, unless you specifically state in your estate planning document that the ex-spouse’s entitlements remain in effect in the event of their divorce from your child, then that ex-spouse would be removed as a beneficiary.

In this case, there are several estate planning considerations to keep in mind:

• Inheritance protection: If you’re concerned about your child’s spouse claiming part of their inheritance in a divorce, a trust can provide protection. Assets held in a properly structured trust are generally not considered marital property.

• Grandchildren’s inheritance: Consider how you want to support your grandchildren. Trusts can be structured to provide for them directly, bypassing your child’s spouse.

• Future spouses: Adjustments might be needed to ensure that future spouses do not unintentionally benefit from your estate.

• Update beneficiaries: If your estate plan includes your child’s spouse as a beneficiary, review and update these designations post-divorce.

To protect your estate and ensure it passes according to your wishes, review and update your estate planning documents whenever you or your family members have a significant life event, such as when a child divorces. 

It’s always a good idea to consult with an estate planning lawyer to address these concerns effectively and tailor solutions to your family’s needs.

Reach out to an estate planning attorney for guidance

Estate planning during or after a divorce can be a daunting task. Professional guidance can make the divorce process more manageable and ensure that your estate plan aligns with your current circumstances and wishes.

It can be beneficial, as well, when the resources you turn to for professional guidance work in tandem with one another. Estate planning and family law attorneys can jointly help you assess your current plans and determine which updates should be incorporated to achieve your long-term goals. 

At Dughi, Hewit & Domalewski, our attorneys in the areas of family law and estate planning collaborate closely to offer clients peace of mind in estate planning. Contact us today for more information.