How Can a Divorce Affect a Will?

A legal will provides an opportunity for a person or testator to express their wishes in regard to how they would like property and other assets to be distributed upon their death. Traditional beneficiaries that are listed in a will include the spouse and children of the testator. These beneficiaries will retain the right to inherit the testator’s estate. Following a divorce decree, however, Texas law automatically revokes any provision that is listed in a will that would benefit a former spouse unless explicitly stated otherwise.

Additionally, according to the rules of testate and intestate succession, any couple who is living apart and intends to divorce or has filed and begun the divorce process will still maintain that the surviving spouse inherits all assets and is entitled to all of the rights of a married spouse.

How Can a Divorce Affect a Trust?

A trust may be included in estate planning as an arrangement where a third party is responsible for another person’s assets and distributes assets to beneficiaries upon death. Following a divorce, trusts are regarded in the same manner as wills, which includes that former spouses are subsequently viewed as deceased prior to the drafter of the trust. This will result in the next heir being the recipient of the estate or other succession being followed.

An irrevocable trust created during the marriage may not be impacted by a divorce because the assumption is that the testator wanted the listed outcome regardless of the possibility of a divorce. If the testator’s wishes were to change, then a new trust would have to be created.

How Can a Divorce Affect Retirement Plans?

Retirement accounts are generally considered marital property and are subject to property division rules during divorce in the state of Texas. If a prenuptial or postnuptial agreement has not been filed to separate these accounts, certain factors will be used to determine the fair division of value to be shared among both parties.

The remaining funds, however, often have designated beneficiaries that will need to be updated following a divorce.

How Can a Divorce Affect a Power of Attorney?

A living will or healthcare directive states a person’s medical wishes in the event that they become incapacitated and cannot communicate on their own behalf. This person is often a spouse who will act as an advocate for their loved one. Following a divorce, the former spouse will no longer serve in this capacity and should be legally changed. The new advocate should be a trusted family member or friend who is aware of desires and beliefs regarding different medical scenarios and interventions.

Many people also name a durable power of attorney who can make financial and other legal decisions on their behalf. Following a divorce, the existing power of attorneys that name the former spouse must be revoked, and a new representative must be appointed.

How Can a Divorce Affect Life Insurance?

Following a divorce, life insurance may be ordered, agreed to continue, or acquired when:

  • As part of a spousal maintenance order
  • Child support is a part of the divorce decree

Term life insurance generally provides coverage for the life of the primary insured for a specific amount of time. It is not an account that is divisible during a divorce because there is no equity or cash value.

Whole life insurance provides coverage for the lifetime of the insured at a premium cost. This policy may include an investment that may be borrowed against and is considered an asset that is divisible during divorce proceedings.

It is important to ensure that a policy is redesignated or specifically designated in a divorce decree.

What Other Beneficiary Designations Should Be Addressed?

During the course of a marriage, a spouse may acquire:

  • Bank accounts that are “payable on death”
  • Insurance policies
  • Annuities
  • Retirement plans
  • Brokerage accounts
  • Health savings accounts

Each of the listed accounts allows the designation of a beneficiary that may not be affected by a will or trust. While Texas law will typically revoke a former spouse’s beneficiary rights, there are a few exceptions, such as:

  • Divorce orders
  • Rights are upheld as a part of a trust
  • A prenuptial or postnuptial agreement that relates to the division of assets
  • Specific provisions included in joint trust documents
  • The testator names the former spouse as a beneficiary following the divorce
  • The testator legally states they wish to uphold the survivorship agreement

When Should Changes to an Estate be Made?

While the divorce proceedings are ongoing, advanced directives and power of attorney should be changed. This will ensure that the other party does not have access to health and financial affairs during the divorce process and that personal wishes will be respected during an emergency situation.

Investment accounts are typically unable to be altered until the property has been assessed and valued for division. Following the divorce and in compliance with the decree, beneficiaries for these accounts can be updated to reflect the current wishes of the account holder.

After a divorce has been finalized, the living trust, durable power of attorney, and final will can be updated to redesignate beneficiaries.

Do I Need an Attorney?

It is crucial to maintain and update critical documents following major life events such as divorce. For help navigating this important and difficult time, call Cutrer Law Group today at 817-854-1651 or fill out a contact form for a free consultation.