Divorce and Estate Planning: The Critical Updates Most People Forget
When you are going through a divorce, estate planning is probably the last thing on your mind. But failing to update your will, beneficiary designations, and powers of attorney can have devastating consequences — including your ex-spouse inheriting your retirement accounts or making medical decisions for you. Here is exactly what needs to change and when.
Why this cannot wait
In most states, your existing will and beneficiary designations remain legally valid during divorce proceedings. That means if something happens to you before the divorce is final, your soon-to-be-ex could inherit everything and make your medical decisions. Do not assume divorce automatically revokes these documents — in many cases, it does not.
Immediate Steps to Protect Yourself
As soon as divorce is on the table — even before you file — take these steps:
Review all beneficiary designations today
Pull up every account that has a beneficiary: life insurance policies, 401(k), IRA, pension, bank accounts with POD (payable on death) designations, brokerage accounts with TOD (transfer on death) designations. Write down who is currently named as beneficiary on each one. This is your starting point.
Change your powers of attorney immediately
This is the most urgent step. If your spouse currently holds your financial power of attorney or healthcare power of attorney, revoke those documents and name someone else — a parent, sibling, or trusted friend. Without this change, your spouse could potentially make financial or medical decisions on your behalf.
Understand the restrictions
Some changes are restricted during divorce. Many states and court orders prohibit changing beneficiaries on life insurance or retirement accounts while the divorce is pending (this is part of ATROs — Automatic Temporary Restraining Orders). Check your state's rules and your specific court orders before making changes.
Updating Your Will During and After Divorce
Most people's wills leave everything to their spouse. During divorce, this creates an urgent problem. Here is what you need to know:
During divorce proceedings
In most states, you can create a new will during divorce proceedings. However, you may be limited in how you distribute marital property since it is still being divided. The typical approach is to create a new will that leaves your separate property and your share of marital property to your children or other chosen beneficiaries, with a trusted person as executor instead of your spouse.
After divorce is final
Some states have “revocation upon divorce” laws that automatically revoke any provisions in your will that benefit your ex-spouse. But many states do not, and even in states that do, the rules are inconsistent and full of exceptions. Do not rely on automatic revocation. Create a brand-new will after your divorce is finalized.
What to include in your new will
Name a new executor (personal representative). Name guardians for minor children — this is critically important for single parents. Update all bequests to remove your ex-spouse and add or adjust beneficiaries. Consider whether your ex-spouse should be explicitly disinherited with a specific clause. Include contingent beneficiaries in case your primary beneficiaries predecease you.
Beneficiary Designations: The Documents That Override Your Will
This is where most people make a costly mistake. Beneficiary designations on financial accounts override your will. Even if your new will says “everything goes to my children,” if your ex-spouse is still named as the beneficiary on your 401(k), they get the money. Period.
Accounts with beneficiary designations to review:
- ✓Life insurance policies — Both employer-provided and private. Your divorce decree may require you to maintain coverage with your ex as beneficiary for child support purposes, so check before changing.
- ✓401(k) and employer retirement plans — Under federal ERISA law, your spouse has special rights to your 401(k). Changing the beneficiary typically requires a QDRO (Qualified Domestic Relations Order) as part of the divorce. After divorce, update immediately.
- ✓IRAs — Unlike 401(k)s, IRAs are not subject to ERISA, so you can usually change the beneficiary more easily. But check your divorce decree requirements first.
- ✓Bank accounts with POD designations — If you set up any bank or savings accounts as “payable on death” to your spouse, update those immediately.
- ✓Brokerage and investment accounts with TOD — Transfer-on-death designations on investment accounts function the same way as beneficiary designations and must be updated separately from your will.
- ✓Pension and annuity plans — If you have a pension, the beneficiary designation is critical and may require a QDRO to change.
Warning: There are real cases where a person divorced, created a new will leaving everything to their children, but forgot to change the beneficiary on their 401(k). When they passed away, the entire retirement account went to their ex-spouse because the beneficiary designation trumped the will. The children received nothing from that account. Do not let this happen to you.
Powers of Attorney and Healthcare Directives
These documents give someone the authority to act on your behalf if you become incapacitated. If your spouse is currently named, changing these should be one of your first actions.
Financial power of attorney
This allows someone to manage your finances, sign documents, access accounts, and make financial decisions on your behalf. Revoke your existing POA in writing, notify any institutions that have it on file (banks, brokerage accounts), and execute a new POA naming a trusted person. Distribute copies to your bank, attorney, and the new agent.
Healthcare power of attorney / Healthcare proxy
This allows someone to make medical decisions for you if you cannot make them yourself. Imagine being in a medical emergency and your estranged spouse being the one making decisions about your treatment. Revoke the old one and create a new one naming a trusted family member or friend. Give copies to your doctor, the hospital, and the new agent.
Living will / Advance directive
If you have a living will that references your spouse in any capacity, update it. Also review your preferences — divorce is a life change that may cause you to reconsider your end-of-life wishes or who you want involved in those decisions.
Trusts and Divorce
If you have a trust, divorce adds complexity. The type of trust determines what can be changed and when.
- ✓Revocable living trusts — If you and your spouse created a joint revocable trust, it will need to be dissolved or restructured as part of the divorce. Assets will be divided according to the divorce settlement, and each spouse typically creates their own individual trust. You can amend or revoke your own revocable trust at any time.
- ✓Irrevocable trusts — These are more complicated because, by definition, they generally cannot be changed. If marital assets were transferred into an irrevocable trust, the divorce court may need to determine how those assets are treated in the property division. An attorney experienced in both trust law and divorce is essential here.
- ✓Trusts for children — If you established trusts for your children, review the trustee designations. If your ex-spouse is the trustee, consider whether that is still appropriate. You may want to name a neutral third party or a professional trustee instead.
Estate Planning for Single Parents
As a newly single parent, your estate plan takes on heightened importance. If something happens to you, you need to ensure your children are protected financially and have a clear guardianship plan.
Name a guardian for minor children
If both parents pass away, who will raise your children? Without a named guardian in your will, the court decides — and it may not be who you would choose. Name a primary and backup guardian. Have a conversation with the people you choose to make sure they are willing and able. Note that if your ex-spouse is alive and has parental rights, they will typically have priority over a named guardian.
Create or update a trust for your children
Leaving assets directly to minor children is problematic — they cannot legally manage money until age 18. A trust allows you to name a trustee to manage the money on their behalf, set conditions for distributions (e.g., education expenses, reaching certain ages), and protect the assets from being mismanaged. Consider whether your ex-spouse should be the trustee who manages your children's inheritance.
Review your life insurance
Make sure you have adequate life insurance to provide for your children if something happens to you. As a single parent, the financial impact on your children is even greater. Consider naming the children's trust as the beneficiary rather than naming minor children directly (who cannot receive the funds) or your ex-spouse (who may not use the money for the children).
Document everything in a letter of instruction
Create a non-legal document that tells your executor and guardian where to find everything: bank accounts, insurance policies, investment accounts, debts, digital accounts and passwords, important contacts (attorney, accountant, financial advisor), and your wishes for your children. Keep this updated and store it with your other estate planning documents.
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Legal Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Estate planning laws vary significantly by state and your individual situation may involve complex legal issues. Always consult with a licensed estate planning attorney and financial advisor in your jurisdiction before making changes to your estate plan, especially during active divorce proceedings when court orders may restrict certain changes.
The information above provides general guidance applicable in most US jurisdictions. Federal laws (such as ERISA for retirement accounts) may also apply. Your specific rights, restrictions, and options depend on your state's laws, your divorce decree, and your individual circumstances.