Your divorce is finally over, and you can focus on your future. But divorce isn’t just about dividing your personal property and getting closure on your custody arrangement. It is also about protecting your and your loved ones financial futures.
After a divorce, updating your estate plan isn’t just a prudent decision. It is one of the most critical steps you can take to ensure that your assets are protected and that your financial and healthcare decisions are made by those you trust if you cannot do it for yourself.
Why You Should Revise Your Estate Plan After Your Virginia Divorce
While you were married, the estate plan you and your spouse created together was likely centered around each other. But now that you are divorced, this plan must be updated and revised.
Even if you did not have an estate plan, your spouse would have been able to make all critical decisions and be the default beneficiary of your estate.
Even though a divorce judgment in Virginia automatically extinguishes some of your former spouse’s rights, it does not revoke all of them. Some accounts, particularly non-probate ones (where you assign a beneficiary), will need to be modified to ensure your ex-spouse doesn’t receive unintended benefit from your estate.
After your divorce, revising your estate plan to reflect your new circumstances should include:
- Updating your beneficiaries
If your spouse was named as the primary beneficiary on your life insurance policies, retirement accounts, and other accounts, failing to change these could result in unintended distributions to your former spouse. - Changing fiduciaries
If your spouse was named as your financial power-of-attorney or healthcare proxy, they could still legally make financial and healthcare decisions for you if you become incapacitated after your divorce. - Revisiting guardianship for your minor children
If you have minor children, you may want to name another trusted individual as guardian to your children or manage their inheritance should something happen to you. - Revisiting your asset distribution
An estate plan predating your divorce may not reflect your current wishes about your property or financial distribution. Updating your plan will ensure your assets are distributed according to your post-divorce wishes. - Considering and avoiding probate complications
Virginia law doesn’t automatically remove your ex-spouse from your estate plan. A revised plan will help prevent scenarios where your former spouse could still inherit assets or have influence over other decisions. - Considering your new tax implications
Because your divorce will alter your financial and tax circumstances, updating your estate plan allows you to account for and explore new strategies. It will also ensure your heirs aren’t burdened with unnecessary taxes.
Bottom line: after a divorce, it is essential to reassess your estate plan to safeguard your assets and ensure your post-divorce wishes are reflected.
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What Happens to Your Estate Before Your Divorce Is Final?
If you are in the process of divorcing and something happens to you, your existing estate plan will determine how your assets will be divided and who will make decisions for you. In other words, the estate plan you and your soon-to-be former spouse created will determine how your assets are distributed and who has control over your healthcare and financial decisions, even if you are planning to divorce.
If you do not have an estate plan, your future ex-spouse will get everything.
If you pass away before your divorce is finalized, your spouse could inherit assets that you would prefer to go to your children or other family members. Furthermore, if your spouse has been named your agent under a power of attorney or as your healthcare proxy, they can legally make critical healthcare and financial decisions for you when you would least like this to happen. To prevent this, you will want to make revisions to your estate plan as early in your divorce process as possible.
Understanding Virginia’s Estate Revocation Laws
Virginia law automatically revokes some of an ex-spouse’s estate provisions after a divorce. This includes bequests and appointments such as the executor of your will or trustee of a trust.
While this offers some protection from your former spouse benefiting from your estate after your divorce, it doesn’t address all the possible scenarios you might encounter. You will want to review and update all your estate documents and consult an experienced estate planning attorney to ensure you are properly protected in all matters.
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Asset Protection After Your Divorce
After your divorce, your share of the marital property is now yours to control and protect for your heirs.
Updating your estate plan ensures these assets are distributed to your heirs and beneficiaries and prevents unintended transfers to your former spouse. However, your updated estate plan must comply with all the terms outlined in your divorce settlement. You will want to work closely with your divorce attorney or estate planning attorney to ensure any agreements in your divorce settlement coordinate and comply with updates to your estate planning documents.
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Revoking or Revising Beneficiaries
In Virginia, some beneficiary designations, particularly on non-probate assets such as life insurance policies, retirement accounts, or payable-on-death accounts (PODs), are not automatically revoked by your divorce. If your former spouse has been named as a beneficiary on any of these accounts, they may still be able to inherit these assets unless you take appropriate measures to prevent it.
Each institution has its own criteria for changing beneficiary designations. You will want to consult with each financial institution to understand the procedures for updating each account’s beneficiary information.
Updating Your Will or Trusts
Your divorce will not nullify your entire will, but it will remove your former spouse’s ability to inherit. Furthermore, a divorce in Virginia also nullifies the appointment of your former spouse as your executor. After your divorce, you will want to revoke your old will and establish a new one.
Unlike a will, the provisions of some trusts may not be automatically revoked by your divorce. You will want to review and discuss these documents with your attorney and understand how they will be affected by your divorce. Like your will, you should consider creating new trusts to manage and protect your assets according to your post-divorce situation.
Revising Powers of Attorney and Any Advance Medical Directives
If your ex-spouse is currently listed as your agent or healthcare proxy, it can still give them significant control over your financial or healthcare decisions if you become critically ill or incapacitated after your divorce. In Virginia, your divorce will not revoke an existing financial power-of-attorney or prevent your former spouse from acting as your healthcare proxy under an advance medical directive.
After your divorce, revoking any existing POAs (Powers of Attorney) or advance medical directives that name your former spouse prevents them from making decisions that might not reflect your wishes. Appoint another trusted individual to act on your behalf and provide copies of your updated documents to your healthcare providers, financial institutions, or other relevant parties to ensure your new wishes are considered should something happen to you and a trusted individual will have control over your financial matters.
Guardianship Designations for Your Children
Virginia courts usually address guardianship and custody arrangements as part of the divorce process when minor children are involved. However, making guardianship provisions as part of your estate plan is still important for many reasons.
Typically, when one parent dies, the surviving parent will retain custody of their minor children. If both parents pass away, your estate plan should name a guardian for your children that reflects your wishes for their care and upbringing. But there may be instances where you may not want that to happen. This should be clearly reflected in your updated will.
Protecting Your Children’s Inheritance
If you have minor children, your estate plan should include provisions for their financial security. After your divorce, you will want to revisit how their inheritance will be managed and distributed, particularly if you are concerned about safeguarding it from your former spouse.
If your children stand to inherit from you, a trust can help manage and protect these assets until your children reach a certain age or milestone. You will be able to name a trustee to manage these assets to ensure they are used responsibly.
Updating and Protecting Your Retirement Assets
Retirement assets may also be a significant portion of your share of the divided marital assets.
After your divorce, you will want to ensure that your former spouse is removed, the account ownership reflects your name, and your beneficiary designations are updated. You may also decide to roll these assets into your own retirement account, allowing you to invest and manage them according to your post-divorce financial strategy for the future.
Considering any Tax Consequences
Your divorce will alter your tax situation, potentially affecting asset transfers. You should consult with your tax professional, divorce attorney, or estate planning attorney to understand and evaluate how the division of your assets and change in marital status could impact your tax liabilities. Strategies may be available to you to lessen this impact and minimize potential tax burdens.
Looking Toward the Future
Estate planning becomes especially important if you decide to remarry, particularly when it may involve a blended family.
You will want to ensure your estate plan reflects how your assets will be distributed considering your new spouse, your current children, and any new children you may have together. Different types of trusts can be beneficial for providing income for a new spouse during their lifetime, with the remaining assets passing on to your children after their death.
Pre- and postnuptial agreements can also clarify the financial rights of each spouse in a remarriage, specifying which assets will remain separate and which will be shared. This can prevent future conflicts and ensure everyone’s expectations are clearly defined.
Consulting With an Experienced Virginia Estate Planning Attorney
When you have your final judgment in hand, there are still important matters to attend to post-divorce. Updating your estate plan is one of these. It is critical to get the assistance of an experienced Virginia Beach estate planning attorney so you can understand your options and ensure your wishes are honored.
At Melone Hatley, P.C., our experienced Virginia estate planning attorneys provide professional guidance and expertise to ensure your post-divorce assets are protected and your loved ones are provided for. To schedule a free consultation, call us at (877) 560-3568 or use our website contact form.
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