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The Importance of Revisiting Your Estate Plan After a Divorce

Many changes accompany divorce, from legal and logistical to emotional and financial. Not surprisingly, it’s common to forget one of the most important post-divorce practices: updating your estate plan. While it’s wise to review your estate plan every time there is a life changing event such as a birth, death, marriage, or divorce, forgetting to revisit your plan after a divorce can result in unintended consequences. For example, if your former spouse is still named as a beneficiary of your retirement plan or life insurance, or if there is a vacancy in a key fiduciary role, your loved ones could have to go to probate court to be able to act on your behalf or collect an asset.

Updating Beneficiary Designations.

Upon divorce, your former spouse is considered to have predeceased you when it comes to your estate plan documents. That means that your former spouse should not receive any distribution from your Will or Trust. However, naming a spouse (or any other beneficiary) on your life insurance policies, work sponsored retirement plans, and IRAs essentially works as a contract between the owner and the insurance or retirement plan provider. The contracts must be revised to match your intentions. Since naming a spouse as the beneficiary directly on these types of assets will control, even if there is an estate plan, the former spouse may end up with these benefits even though he or she is considered predeceased for other estate plan purposes. Usually the divorce judgment will include a provision terminating a spouse’s interest in an insurance policy or retirement account; however, if you do not actually re-name the beneficiary, the former spouse and intended beneficiary could end up in court. In an instance with an ERISA policy for example, the insurer is not required to follow the Judgment of Divorce.

Removing your former spouse from these beneficiary designations is crucial, but we also encourage you to discuss your proposed new beneficiaries with an attorney to ensure that there are no unintended consequences for your new beneficiaries. For example, naming your estate as a beneficiary of assets can result in a loss of tax deferral on qualified assets or loss of eligibility for government benefits. Naming your estate as beneficiary is also a ticket to probate court for your loved ones.  However, listing individuals as outright beneficiaries rather than a trust can also result in the loss of some benefits. These and other unintended outcomes are all avoidable with proper planning and counsel.

Reviewing Fiduciary Appointments. 

It is also important to review your nominated fiduciaries. Who is next in line as your Trustee, Personal Representative, Agent under Durable Power of Attorney, and Patient Advocate now that your former spouse is out of the estate planning picture? Had you listed anyone else from your former spouse’s family as one of your fiduciaries? Some people choose to update the Patient Advocate designation while the divorce case is pending to avoid any uncomfortable scenarios. Under Michigan law, the provisions of your estate planning documents naming a former spouse and/or his or her relatives are automatically revoked upon divorce. After that automatic revocation, do you have successor or “backup” fiduciaries listed for each role? If no fiduciaries are listed, your loved ones may have to go to probate court to be appointed to act on your behalf under your Durable Power of Attorney and/or Patient Advocate Designation, and the probate court may appoint a Trustee or Personal Representative. However, without a nomination, the court may not appoint the person you would want.

Reviewing the Beneficiaries of Your Trust or Will. 

Similarly, it is important to review the sections of your estate plan relating to beneficiaries. As noted above, gifts to your former spouse and his or her family under your Will or Trust will be automatically revoked upon divorce. After those gifts are revoked, do you have alternate or contingent beneficiaries listed, and are those remaining beneficiaries still the beneficiaries you wish to receive your estate? Taking the time to review the beneficiary sections of your plan will ensure that your estate goes to those whom you intend and does not go to anyone whom you do not.

While the foregoing issues are some of the most common estate planning concerns to review following a divorce, it is important to review your plan in its entirety as every estate plan is uniquely created for the individual(s) who executed it. Divorce is difficult, and the last thing on your mind may be updating your estate plan, but it is an essential step in ensuring that your wishes are still being carried out.

© 2022 Varnum LLPNational Law Review, Volume XI, Number 25

About this Author

Julia A. Perkins Family Law Attorney Varnum Novi, MI

Julia is the chair of the Family Law Team and works with clients in family law matters including divorce, child custody, child support and parenting time matters. She has unique experience with international custody cases and valuation and division of high net worth marital estates. She is also a certified mediator with a focus in family law.

Julia's experience also includes representing clients in commercial litigation.

Practice Areas

  • Family Law
  • Adoption
  • Business Owners: Valuations
  • Custody, Parenting Time and Child Support
  • ...
Shalini Nangia Family Law Attorney Varnum Ann Arbor, MI

Shalini is a member of the Family Law Practice Team. She specializes in family law litigation, including high-income and high-asset divorces, custody and parenting time, child support, paternity, property division, retirement benefits and post-judgment matters. Her goal is to help clients during one of the most difficult times of their lives get from Point A to Point B in the most efficient and painless manner possible.

Shalini is a trained mediator and an adjunct faculty member teaching family law at the University of Detroit - Mercy School of Law, as well as a regular presenter...

Rebecca Wrock Estate Planning Attorney Varnum Law

Rebecca is a member of the Estate Planning Practice Team. She advises clients on all aspects of estate planning and trusts, including probate avoidance, asset protection, special purpose trusts and elder law matters including Medicaid, veterans and special needs planning.

In addition to her law degree, Rebecca holds a Tax LL.M., which allows her to provide an additional level of knowledge critical to estate planning matters. She also has unique focus and experience in planning for companion animals (pet trusts) and has been recognized for her contribution to legal education in this...