Untying the Knot and Updating Your Estate Plan: What Divorce Means for Your Estate Planning in New York

So, you’re getting a divorce, and we’re sure it hasn’t been very fun. Divorces are messy, and maybe sad in some ways (and maybe happy in others?!), and unbelievably stressful.

There are decisions to be made about literally everything - the house, the finances, the kids, and the future. Don’t worry, it’s not you. It's a lot for anyone to digest. And in the middle of all of that, estate planning is almost always the last thing on anyone's mind.

We’re here to urge you to not let that happen! After all, your estate plan doesn't know you're in the process of getting divorced. For example: your Power of Attorney may have your soon-to-be ex-spouse as the primary agent; your Health Care Proxy may have your soon-to-be ex-spouse as the primary agent; your Will may provide that your soon-to-be ex-spouse is the primary beneficiary, your Deed may provide that title to your home is vested in both of you; your bank accounts may be held jointly, your beneficiary designations on retirement accounts may have your soon-to-be ex-spouse as the primary beneficiary . . . and so on!  Yikes!  Those arrangements may be exactly the opposite of what you want.  And, while you are in the process of going through a divorce, you may be able to take deliberate, thoughtful action to review and update your estate planning documents and arrangements.  So, hopefully we have your attention!!! Because this is SERIOUS STUFF!

Let’s repeat (as it’s so important) - if you are going through a divorce, you may be able to take immediate proactive steps, as opposed to waiting until the divorce is finalized.  You would want to work through any potential estate planning while in the process of getting divorced with your estate planning attorney who would coordinate with your divorce attorney.

As well, if you have recently finalized a divorce, you absolutely want to review your entire estate plan to get everything up to date.  Often times, follow-through is missed causing headaches down the road.  Just think of real estate alone - is there to be a conveyance from one party to relinquish their ownership in the asset?  Again, there is much to review here so things do not get missed and more complicated down the road.

Wherever you may be in regard to the process of divorce, this post is for you to remember to take care of estate planning in a proactive fashion!  Waiting around can lead to problems.  As one other “what-if” - if you were unable to act in regard to your financial matters tomorrow, would you really want your soon-to-be ex-spouse acting on your behalf with these matters? 

New York Default Law Shouldn’t be Your Estate Plan

Many people assume that once a divorce is finalized, an ex-spouse is automatically removed from everything in their estate planning documents or nothing further needs to be reviewed regarding estate planning.  Even though there is a New York State default statute which treats a former spouse as having predeceased the other spouse or revokes a former spouse’s designation in certain estate planning documents and arrangements, it is not wise to rely on this state statute.  The better idea would be to deliberately plan to actually rebuild your estate plan to account for any potential issues!  Rebuild your life = rebuild your estate plan.

Under New York's Estates, Powers and Trusts Law, a divorce or annulment will revoke certain dispositions made to the former spouse in a will and other documents; however, relying on state default laws is exactly how things get missed.  Even still, the default statute may conflict with the documents in place or the default state statute may have to defer to Federal law, so it is important to clean-up any potential confusion.

When it comes to assets having beneficiary designations, you want to actually change these designations and obtain confirmation for the future. You should inventory every asset that passes by beneficiary designation and review who is currently named as the beneficiary, and what would happen if that person is treated as having predeceased you.  Who is the alternate beneficiary or beneficiaries?  Instead of further conflicts and problems here, the beneficiary designations should coordinate with the entire estate plan. 

When it comes to retirement accounts, it’s another opportunity to review what you have and make appropriate changes.  Once upon a time, you might remember when you set up your 401k or other retirement account and named beneficiaries through beneficiary designations. The beneficiaries on these accounts, and others, are governed by the plan documents themselves, not by your will and may not automatically be governed by New York State default law. For retirement accounts, think: IRA, 401(k), 493(b), pension, deferred compensation, annuities, and so on.  For employer retirement plans subject to ERISA, Federal law can preempt state law in certain circumstances.  There can be complications between the divorce decree, waivers of rights to retirement benefits, the governing plan documents, a potential separation agreement and the beneficiary designation.  Reviewing all the factors involved and eliminating any potential conflicts or confusion means NOT relying on the state default statute as your estate plan. 

All other assets should be reviewed, as well.  Certain arrangements may be updated during the course of the divorce process and, other arrangements may need to wait until the divorce is finalized.  Part of this will be determined by whether there is a legally binding separation agreement in place; and part of this will be determined by what other requirements and documents exist and how they may factor into the divorce.

As well, all estate planning documents and arrangements should be reviewed to determine what can be updated immediately, what needs to be further determined during the course of the divorce and what needs to be finalized after the divorce.  For example, you would want to consider your Power of Attorney, Health Care Proxy/Living Will, any trust documents, real estate interests, business arrangements, bank accounts, annuities, pensions, and so on. 

At the end of the day, we could not stress more to not assume the default state law has taken care of your estate plan for you. 

The Documents You Need to Review Right Away

When a divorce is underway or has recently been finalized, there are several key documents and designations that deserve immediate attention:

Your Will

If your will was drafted during your marriage, it almost certainly reflects your life as a married person - including assets, executors, and intentions that may no longer apply. Beyond removing your former spouse as a beneficiary, you'll also want to reconsider who you've named as your executor. If your ex-spouse is currently nominated in that role, or perhaps someone who is no longer an ‘in-law’, now is the time to revisit that decision entirely. (For more on choosing the right executor, our post Who Should Be My Executor? walks through exactly what that decision involves!)

Beneficiary Designations

Review every account, policy, and plan that has a named beneficiary. This includes life insurance, retirement accounts (IRAs, 401(k)s, 403(b)s), annuities, and any payable-on-death or transfer-on-death accounts. These must be updated directly with the institution or plan administrator - updating your will alone will not change them.

Your Health Care Proxy

In New York, your Health Care Proxy designates who can make medical decisions on your behalf if you are unable to do so yourself. If your former spouse is currently named, that designation should be revisited. Who do you trust with that responsibility now?

Your Power of Attorney

Similarly, if your ex-spouse has been granted Power of Attorney - the authority to make financial and legal decisions on your behalf during your lifetime - that document needs to be reviewed and updated as soon as may be possible.

Any Existing Trusts

If you have a revocable living trust or any other trust that names your soon-to-be ex-spouse or, once the divorce is finalized, your ex-spouse as a trustee, successor trustee, or beneficiary, those provisions will need careful review. Trust documents may need certain changes or new trusts may be the more appropriate arrangement. This might all seem a little overwhelming, but it doesn’t have to be. This is a conversation to have directly with your estate planning attorney, who can walk you through these actions step by step!

Any Existing Entity/Business Arrangements

If you or your soon-to-be ex-spouse have any interests in a business, you want to revisit the business structure, governing documents and authority permitted to act on the business.  For example, the Operating Agreement and other governing documents in the LLC that you and your soon-to-be ex-spouse, or once the divorce is finalized, your ex-spouse, have business interests in . . . or the business checking accounts that you both have signature authority on  . . . or the corporation in which you were never named as a shareholder but, essentially, acted like one . . . or vice versa . . . or a “buy-sell” agreement that needs to be revised or completely changed .  . or a Power of Attorney allowing your soon-to-be ex-spouse or ex-spouse the authority to manage your business interests and so on.  It’s all too easy to forget about business interests or wait until the divorce is finalized, but, so much can happen that could be disastrous for the business.  It’s imperative to start reviewing these matters as soon as possible.

What About the Kids?

For families going through divorce with minor children, estate planning takes on an added layer of complexity. Guardianship nominations, trust structures for children's inheritances, and how assets are managed on behalf of minor children or other considerations all deserve a revisited look in the context of your new circumstances. The goal is to make sure your children are protected as best as possible - and that your intentions are clearly documented and legally sound going forward.

If one parent passes, the surviving parent is the natural guardian of the minor child.  It’s when both parents pass, that documents created by that last individual to pass come into play.  This possibility should be reviewed during the divorce process so that each parent is obligated to create or update their estate planning documents in an acceptable manner. If one parent names certain guardians to act for minor children while the other parent nominates different guardians to act for minor children, it’s only a matter of which parent survives the other as far as the document that will come into play. It’s also important to note that there can be different guardian nominations: there are guardian of person nominations and guardian of property nominations.  As well, other plans could be in place to handle assets and financial matters on behalf of minor children (or children, in general), including a testamentary trust or a lifetime trust.

The bottom line here is that the estate plan between the two parents should contemplate minor children and other concerns in order to determine appropriate planning.

Timing Matters - Don't Wait Until It's Final

One common misconception is that estate planning updates should wait until the divorce decree is signed. In reality, there are steps that can and should be taken during the divorce process itself - with the guidance of your estate planning attorney in coordination with your divorce attorney. Depending on your situation, you might want to update certain documents well before the ink is dry on your divorce. Every situation is different, and the timing of various updates will depend on your specific circumstances, but waiting until "everything is settled" can leave you unnecessarily exposed in the interim. You can think of making adjustments once everything is completely finalized if it is needed.

For families in our Buffalo and Williamsville communities, we see time and time again that the clients who fare best are the ones who treat the estate planning piece as part of the divorce process, not an afterthought.

A Note on Starting Fresh

Divorce is also, in many ways, a fresh start. Once the dust settles, it's an opportunity to build an estate plan that truly reflects your life as it is now - your priorities, your people, and your wishes going forward. If you've never had a comprehensive plan in place, or if your existing plan was built entirely around your marriage, perhaps now is the opportunity to do so, and do it the right way! If you need some encouragement to take the first step, sometimes understanding what will happen if you don’t take action can help - If that’s the case, our post No Will? Here's What Happens to Your Estate if You Live in New York State is a good place to start understanding the stakes.

We're Here to Help You Move Forward

Updating your estate plan after a divorce isn't just a legal formality - it's one of the most important steps you can take to protect yourself and the people you love in this next chapter. From reviewing your existing documents to building a new plan from the ground up, we are here to guide you through every piece of it. 

To learn more about your options, make sure to visit our Trusts, Wills, & Legal Documents page, or reach out to schedule a consultation. Whatever your situation looks like right now, we're here to help you move forward with care, clarity, and confidence!