A divorce significantly impacts many aspects of your life, including your estate plan. After the divorce is finalized, plan to revisit your estate plan to ensure it still functions as you intend.
Estate Plan Basics
Estate plans generally involve planning for decision-making during your life when you are unable to make certain decisions, which are commonly referred to as power of attorney documents. In addition, estate plans will also provide for the disbursement of your assets after your passing, which may include a will, trusts, and other beneficiary elections.
How Divorce Affects a Wisconsin Estate Plan
In Wisconsin, a finalized divorce will revoke all estate plan provisions relating to your former spouse, unless you make arrangements otherwise. Therefore, if your estate plan does not explicitly address decision making after divorce and currently grants a role to a former spouse, the provisions involving a former spouse will fail. This result may be the intention of divorced individuals, but it is certain to leave serious holes in the estate plan, which must be corrected.
If your Wisconsin estate plan involves lifetime planning, it likely includes provisions regarding who can make medical and financial decisions for you if you are incapacitated. A divorce’s impact on this part of the plan is stark. A power of attorney for health care document will be automatically revoked if your former spouse is named as the decision-maker, regardless if you name an alternate decision-maker. The divorce invalidates the entire document. Therefore, if you would like someone to make the medical decisions for you if you are incapacitated (be it your former spouse or a new designee), you must update your health care power of attorney document after the divorce.
A durable power of attorney for finances document will determine who makes financial decisions for you while you are incapacitated or otherwise unavailable. Unlike the health care power of attorney, the financial power of attorney can survive a divorce judgment. However, if your former spouse is listed as the decision-maker, his or her authority is terminated upon the filing of the divorce action, unless the document provides otherwise. Even if you list an alternate decision-maker, you should update your financial power of attorney to account for the divorce and other changes in your life that occur with divorce or the passage of time.
Wisconsin Estate Planning
No matter the size of your estate or complexity of your plan, you should strongly consider updating the provisions relating to your former spouse, specifically whether he or she has administrative functions and/or whether your former spouse is to receive assets at your death.
If your former spouse is involved in either of those provisions, then the provisions are voided upon divorce. For example, if your estate plan was established before the divorce and lists your former spouse as personal representative (sometimes referred to as “executor”), your former spouse will not be able to serve in the role unless you update your will to provide for that. If no alternate personal representative is listed, then the court would have to appoint one, which results in time spent in court, additional costs, and a delay in distributing your assets.
When looking at how your property is distributed after your passing, you must also be mindful of property not included in a will or trust documents. Some property, like life insurance or retirement accounts, require the listing of a beneficiary. The beneficiary will receive that property upon your passing directly from the servicer and it will not pass through a will or trust. Generally, when a divorce is pending, you are prohibited from changing the beneficiaries on these types of accounts. However, once the divorce is finalized and if there are no provisions within the divorce judgment to the contrary, you should update each of those beneficiary designations.
Compliance with the Divorce Judgment
Provisions of your divorce judgment may limit your options when updating your estate plan. Your divorce judgment may require you to have a life insurance policy to supplement a support obligation after your passing. While less common, your judgment may also restrict your ability to remove your former spouse as beneficiary on other assets, like a retirement account. Fully reviewing your divorce judgment when updating your estate plan is essential to ensure you are not violating a court order.
We Can Help
If you are in the Milwaukee area and have questions about updating your estate plan, or establishing a plan, please contact Attorney Matt Ackmann at 414-271-8650. In addition, if you have questions about the divorce process, please contact one of the Hawks Quindel family law attorneys by calling 414-271-8650 in the Milwaukee area or 608-257-0040 in the Madison area.