Guest column: Estate planning after a divorce
By Carissa Giebel
Estate planning after a divorce: First and foremost, everything needs to be updated. The fiduciaries need to be changed in the powers of attorney, and the beneficiaries and fiduciaries named in the will or trust need to be updated.
Beneficiary designations, including any payable on death accounts, are the assets that often fall through the cracks. These include assets such as life insurance policies, retirement accounts, employment death benefits, and annuities.
If powers of attorney are not updated after a divorce, Wisconsin law revokes any nominations of the former spouse in a fiduciary capacity, unless the document provides otherwise. However, a durable power of attorney should be executed after a divorce to name a new fiduciary for managing financial affairs and a health care power of attorney to name a new fiduciary to make health care decisions.
If no estate planning is done and death occurs without a will (intestacy), Wisconsin law says the former spouse and his or her relatives are out of the picture. Any beneficiary designations naming the former spouse or his or her relatives are revoked as well.
A new will or trust should be executed after a divorce to name entirely new beneficiaries and a new personal representative or trustee. If death occurs and there is a surviving minor child, the former spouse will become the guardian of the minor child, as the surviving parent. This means the former spouse will also control all assets passing to the child, unless there are trust provisions to the contrary. To prevent this from happening, a testamentary trust or a revocable living trust should be set up to name a trustee to manage the child's inherited assets. A will should also be set up to nominate a guardian for the child in the case that the former spouse predeceases you or is an unfit guardian.
In a second marriage situation, it is even more imperative to update the estate plan, especially when there are children from outside the marriage.
The difficulty in this situation is providing for the children, but also making sure the new spouse is provided for. If no planning is done, the laws of intestacy provide that half of the individual property will pass to the surviving spouse. Individual property can generally be described as property acquired prior to marriage, unless defined differently in a marital property agreement.
On the other hand, the children from outside the marriage will receive the other half of the individual property and all of the decedent's interest in marital property.
The surviving spouse, of course, keeps his or her interest in the marital property. This is rarely the desired outcome, which is why planning should not be overlooked.
Whether you are in the process of divorce, recently divorced, been divorced for years, or in a second marriage, now is the time to update your estate planning.