What Happens to Your Will if You Get Divorced?

It is especially important to review your estate plan in a divorce situation.
It is especially important to review your estate plan in a divorce situation.

Every time you experience a life changing event, including divorce, it’s time to revisit your Will to make sure there are no unpleasant surprises for you or your family. As reported in the article “Rewriting Your Will After Divorce” from Investopedia, failing to review your current estate plan when contemplating a divorce can lead to results that you never intended.

Texas Law Can Save You

Luckily, in Texas we have several laws that cover you if you forget or don’t get around to writing your ex spouse out of your Will. Texas law presumes that after a divorce you do not want a former spouse to be a beneficiary under your Will or to act as your executor or agent under a power of attorney to make financial or medical decisions for you.

In fact, if you do want your former spouse to be your executor or agent, you need to reappoint them in new estate planning documents you execute after the divorce.

One thing to remember is that if your ex is a parent of your children, you will not be able to eliminate him or her as a guardian of your children if something happens to you while they are minors. The only way the other parent will not be allowed to be guardian of his or her child is if the parent is found unsuitable.

But you should still execute a new designation of guardian for your minor children in case your ex who is the parent is deceased or is found to be unsuitable to be guardian.

So, Where’s the Problem?

What if you pass away before the divorce is final? The law only applies to a divorced spouse, not if you are only separated or waiting for the divorce to be final. That’s why it’s a good idea to change your estate planning documents when you’re contemplating a divorce.

Issues With Some Retirement Plans

Also, Texas law cannot override a very harsh US Supreme Court case holding that state law does not apply to employer related retirement plans, such as 401(k)’s and 403(b)’s. These kinds of retirement benefits are subject to federal law which supersedes state law.

This US Supreme Court case, Egelhoff v Egelhoff, was decided in 2001. Mr. Egelhoff, an employee of Boeing Company, had a pension and life insurance policy that was provided by his employer.

Mr. Egelhoff, died in a car accident two months after his divorce, but before he changed the beneficiaries on his retirement and company life insurance.  Though the company still listed Mr. Egelhoff’s ex-wife as beneficiary, Mr. Egelhoff’s children by a previous marriage claimed that he had every intention of removing their stepmother as beneficiary and naming them, his children, as beneficiaries. That would seem to make sense given the circumstances.

Mr. Egelhoff’s children sued their father’s ex-wife for the retirement benefits and the life insurance, claiming that there was no way their father wanted his ex-wife to have the benefits to the detriment of his children.

The Court said that, under federal law, the company’s plan documents control who the beneficiary is and that the benefits would be distributed to the person who was listed with the company as beneficiary at the time of death, even if the beneficiary had been recently divorced from the employee.

The moral of the story is to make sure that beneficiaries on company related benefits are changed immediately after divorce to avoid the unfair result that happened to the Egelhoff children. State law cannot save you in that situation.

What’s Our Takeaway from This?

Every time there is a major life event (divorce, death of a family member, marriage, increase or decrease in wealth, illness, etc.) it is time to review your estate plan to make sure that it reflects what you want and need now. If you wait too long, things may not work out the way you want them to for your family and yourself.

Reference: Investopedia (September 14, 2021) “Rewriting Your Will After Divorce”

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Making Medical Decisions During Incapacity

Medical decisions during incapacity are made by the individuals named in a Medical Power of Attorney and Living Will following your wishes.

Today, there is greater awareness that incapacity from disease or injury is not a hypothetical. It’s reality, and there are tasks that must be done, as explained in a recent article entitled “Now Is the Time to Protect Your Health Care Decision-Making Rights” from Kiplinger, for making medical decisions during incapacity.

You have a fundamental right to make your own decisions regarding your healthcare decisions.  However, that can change quickly.  Failing to have your healthcare wishes documented properly also leaves your family in the terrible position of having to guess what you want, which puts them in a difficult and stressful position.

An estate planning attorney works with clients to plan how their assets will be distributed after they die (using a will and trusts, among other tools). However, they also help clients prepare for incapacity. Both are equally important, and incapacity planning might even be more important. There are three basic solutions used in most states, although each state has its own specific rules, so you will want to work with an estate planning attorney from your geographic area.

A Living Will (Directive to Physicians in Texas) addresses what you want to happen if you are in an end-stage medical condition or permanently unconsciousness. The living will can serve as an advance written directive for the type of treatment you want to have, or what treatments you do not want to have. If you are unable to communicate your wishes, this document conveys them in a clear and enforceable manner and indicates who can make that decision for you.

A Medical Power of Attorney works differently than a Living Will. This covers health care decision making when you cannot convey your own wishes. You appoint one or more agents to make health care decisions for you. They use their personal knowledge of you and the direction you indicate to make decisions on your behalf.

If you have not executed documents like these before becoming incapacitated, there are laws which provide for default decision-makers.  These laws authorize a list of individuals in order of preference to act as your health care representative and make health care decisions for you. This is the last and worst option.

It is much better for you and your family to have a plan and the proper documents for making medical decisions during incapacity. First, the state decides who will make healthcare decisions on your behalf, based on the law and not based upon people who you feel comfortable making these very personal decisions for you. If more than one person is named and the family cannot come to an agreement as to what your care should be, they may end up gridlocked, and you are the one who suffers.  This may also lead to delay in making the decision as the medical providers have to access who can make the decision based upon your family make-up, all while your medical care needs to be addressed.

Create a plan for your healthcare when you are creating or updating your estate plan. It will give you the peace of mind that, even in the worst of situations, your loved ones will know what you wanted to occur clearly and be able to go forward in following your wishes.

Reference: Kiplinger (April 29, 2021) “Now Is the Time to Protect Your Health Care Decision-Making Rights”

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Is It Time for an Estate Plan Checkup?

Because life brings many changes, you should have an estate plan checkup at least every three years.
Because life brings many changes, you should have an estate plan checkup at least every three years.

After you’ve met with an attorney to do your first Will, it is easy to assume that you have checked estate planning off of your to do list forever. The reality is not so simple. Not only do tax laws frequently change, but so does your life. The smallest change could have a big impact on your estate plan. That’s why it’s a good idea to go through an estate plan checkup at least every three years to ensure your estate plan still accurately reflects your values, needs, and hopes for your legacy.

Even if you have already created an estate plan you feel confident about, circumstances surrounding your decisions may change. Marriages end, children grow up, and serious illnesses occur. When laws change, some estate planning techniques can become outdated.

An estate plan checkup should include a look at how your accounts and property are titled to see if any changes are necessary. Joint ownership of your property, for example, may be a good idea or a bad idea, depending on the circumstances. Births or deaths of loved ones may lead you to change your beneficiaries. The person you named as one of your trusted decision-makers (for example, a trustee, executor, agent under a financial power of attorney, or agent under a medical power of attorney) may no longer be the best option due to relationship changes or physical relocation. Such changes can occur without your thinking of the effect they have on your estate plan, so it is worth a periodic estate plan checkup to make sure your your plan still reflects your wishes.

Significant financial change can also be a good reason for an estate plan checkup. If you have taken on a new job, bought a house, or made new investments, you will want your estate plan to reflect these changes. If you have a trust, the only way to ensure that your accounts and property are kept out of probate is to have all of your accounts and property appropriately funded into the trust or naming the trust as beneficiary.

Changes in the laws affecting how assets are left to beneficiaries seem to be happening with more and more frequency. For example, the recent SECURE Act and the elimination of the lifetime stretch for nonspouse beneficiaries shows how important it is for you to talk with your estate planning attorney  about the effect this new law may have on the beneficiaries of your retirement accounts.

Life is ever changing, and many changes may have a great impact on your estate plan. If you or your family have undergone any changes since your estate planning documents were originally created, now is the perfect time to reach out to your estate planning attorney for an estate plan checkup.

If you think it may be time to consider a revocable living trust instead of a Will, you may be interested in https://www.galliganmanning.com/will-vs-living-trust-a-quick-and-simple-reference-guide/.

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