If you have recently filed for divorce, then you will also want to consider changing your estate plan in the process. The New York Estates, Powers, and Trusts Law 5-1.4 addresses the effect of divorce, annulment, or judicial separation on estate planning documents such as wills, and if certain steps are not taken, then your divorce could have an unexpected and unwanted impact on the way that your assets are distributed at your death.
Let’s take a closer look at key areas that you need to review so that appropriate action may be taken.
The moment your divorce (or annulment or separation) goes through, all beneficiary designations you made to your former spouse are automatically revoked (unless the language in the document prohibits such revocation) and the next listed beneficiary would receive the money or property.
If, however, you do not list “backup” beneficiaries, then the assets in question would have to undergo estate administration or probate before it could be passed on to your heirs. This can cause problems with tax-deferred accounts such as 401(k)s and IRAs, where a lack of listed beneficiaries causes negative tax consequences.
Wills and advance directives
Terminating the marriage also removes your spouse as beneficiary under your last will and testament and any advance directive arrangements, such as power of attorney or health care proxy. Unless you appoint someone else, there will be no one immediately empowered to manage your finances and healthcare if you become incapacitated or pass away.
A word about in-laws
Divorce may automatically disqualify your former spouse as agent or beneficiary, but it does not do the same with any of their family members. If, for example, your appointed your former brother-in-law to be your health care proxy, or you left money or property to your in-laws, then those arrangements still stand after the divorce. If you are fine with this outcome, then no further action is needed. If you want to “divorce” your former in-laws too, then see an estate planner immediately.
A word about timing
The automatic revocation as per EPTL 5-1.4 does not come into effect until the divorce is over. If you die before that happens, then your spouse will still be able to benefit from whatever designations and inheritances are currently in place. For this reason, see an estate planner or wills and trusts attorney as soon as you know for sure that the marriage is over.
If you are contemplating divorce, then a Bronx family law attorney can point you in the right direction when it comes to changing your estate plan. To plan for the future, it will be necessary to remove certain plan agents from your past. Jayson Lutzky handles divorce and family court cases in the Greater New York City area. Visit www.MyNewYorkCityLawyer.com to learn more about Mr. Lutzky. He offers free initial in-office consultations. Call 718-329-9500 to set up an appointment. Saturday hours are available.