Divorce: And How It Should Impact Your Estate Plan


by Doug Sherry, President, Arden Trust

Going through a divorce is highly emotional and can consume your full time and attention. One of the last things you’re probably thinking about is your estate plan and how the divorce will impact it. But once the divorce is final and you can refocus on other matters, it’s an important time to “revisit” your estate plans, as your now ex-spouse is likely named in multiple capacities in your estate planning documents.

You may have even named your now ex in-laws in some capacity. Not that you necessarily have to remove all semblance of your former marriage and in-laws, it is nevertheless a good idea to review your estate planning assumptions, in the light of day, to determine if you still have the confidence you once had in naming various “exes” to carry out your wishes.

Statute of Intestacy

If you haven’t created an estate plan and therefore think you don’t have one—you are dead wrong (pun intended). If you die without a will, your estate plan is the one the state drew up for you and it’s referred to as the "Statute(s) of Intestacy". Interestingly enough, if you die intestate, you actually may be better covered post-divorce than if you have your own, custom-drafted estate plan that you don’t update. That’s because under most intestate statutes, ex-spouses do not inherit. With that being said, it’s important to have an estate plan of your own to the extent you want to control the disposition of your estate and not rely on the one the state drew up for you.

What to Review

Let’s explore some of the items you’ll want to review. There’s the obvious: wills, trusts, and powers of attorney. And the less obvious: beneficiaries on retirement accounts, IRAs, and brokerage accounts. Then there are some you simply forgot about: payable on death (POD) designations on checking and savings accounts. Finally, there’s the one many folks forget about, but is critically important: beneficiaries on life insurance policies.

Any financial holding or financial document should be reviewed after a divorce to ensure they still accurately reflect your wishes. You should review your medical documents as well. After all, do you want your ex-spouse to be the one deciding if they should “pull the plug”?

The Children's Best Interest

Statistically speaking, half of all marriages end in divorce. It’s important to remember, that statistic includes your children. Many people assess the need for a trust based on their children’s maturity level, or financial responsibility acumen. In other words, if their children are old enough and display an appropriate level of financial intellect (i.e. – he/she is not a spendthrift), the parent might think there is no need for a trust to protect their children’s best interests.

No matter how much you may currently like your son-in-law or daughter-in-law, do you want them to be the recipients of half of your child’s share of their inheritance from you? What about a family heirloom, a piece of art, or your family business? Even with good intentions, your child could accidentally comingle their inheritance with marital property. Then, under the best of circumstances, she/he would spend an inordinate amount of money and time disentangling said inheritance; and under the worst of circumstances, could lose half of their inheritance to a now ex. Wouldn’t it be better to ensure these items stay in the family and don’t get fractionalized or bifurcated through a divorce?

In fact, the potential for children to go through a divorce is becoming a prominent reason for holding a child’s inheritance in a trust. Under these circumstances, many parents include liberal distribution standards, as the purpose of the trust is not to protect the assets from the child– but their soon-to-be ex-spouse.

Regardless of your feelings about your in-laws, it is critical to review all your estate planning and financial documents after your divorce. But also remember to ensure your bases are covered if one of your children gets divorced—after all, if you have two children, the odds say one will get divorced.


Arden Trust Company does not provide legal or tax advice. Please consult a legal or tax professional for advice specific to your circumstances.