I recently read a post on a social media platform concerning a woman who had been divorced for 15 years, but had a will that left $750,000 to her ex-spouse.  The woman had not updated her will after the divorce, so when she passed away, the will gave that amount to her ex-husband, leaving her child with nothing.  I don’t think this was the result the divorced woman intended!

Fortunately, in Colorado we have different laws and rules.  In Colorado, according to the statutes, specifically C.R.S. § 15-11-804, the law treats your ex-spouse as though they died right before you passed away.  This means gifts or bequests to your ex-spouse in a will no longer need to be made.  Your ex-spouse will no longer act as your representative, so the ex-spouse will not be your personal representative in a will, or agent under a financial or medical power of attorney, if the ex-spouse was so named.

While these are good protections in the case of divorce, they do not address all of the potential problems that may stem from not updating your will or estate plan after a divorce.  The will may no longer include gifts to an ex-spouse, but a divorce doesn’t have the same affect on beneficiary designations that pass along money or assets outside of the will.  And, while an ex-spouse may no longer need to be involved as your representative, some practical aspects of updating your will and estate plan mean it is just a good idea to update the entire plan.  As with any estate plan, the more proactive you can be in updating your estate plan, the better and smoother things will go when the time comes to implement your estate plan.

 

You Will Is Only One Part of The Estate Plan – And it Doesn’t Control Everything

The will is a foundational document for most estate plans, describing who should receive assets after you have passed away.  But, the will doesn’t control everything.  Many assets have beneficiary designations that designate who should receive that particular asset upon your demise.  Assets like life insurance, retirement plans (IRAs, 401k(s), TSPs, etc.), and many traditional investment accounts like brokerage accounts have beneficiary designations.  When you pass away, your designated beneficiaries on those accounts will receive the assets from those accounts, and Colorado law doesn’t void beneficiary designations the same way it will void a gift to a spouse through a will.  Instead you will need to update those beneficiary designations for each of the accounts with the companies that hold and administer such accounts.

If you update your will after a divorce, then you can also double check your beneficiary designation and ensure the beneficiary designations are set up to go to the proper individuals, and not an ex-spouse because you forgot to change a beneficiary designation.  Changing and updating beneficiary designations may not exactly be changing the will, but updating a will after a divorce can jog your memory about updating beneficiary designations and the rest of your estate plan, and that is definitely a good thing!

 

The Naming of a Representative Evaluated Practically

In your estate plan you name quite a few representatives, such as a personal representative in a will, a successor trustee in a trust, or an agent under a financial or medical medical powers of attorney.  Each of these people can act on your behalf in different situations, and often a spouse is named in first place.  After a divorce, the ex-spouse’s responsibilities no longer apply, but that isn’t always obvious.  An ex-spouse’s name may still appear on a document as a named representative, so an ex-spouse with nefarious motives could take advantage of the situation.  Obviously we don’t want ex-spouses with nefarious motives acting in bad faith.  Of course, an ex-spouse who acts in a manner that is not in the best interest of a client is acting inappropriately, and such actions can be undone, but the time and effort of undoing incorrect or illegal acts can have negative consequences for a victimized spouse.  Certainly not all spouses act in a nefarious manner, but in the case of a spouse inclined to act badly, the sooner you can get the spouse removed from the paperwork showing who is responsible, the better.

For those who do not have an ex-spouse acting in bad faith, or in a manner contrary to the interests of an ex-spouse, as is the case for most divorces, an ex-spouse’s name on a power of attorney, will, or trust can still be a hinderance.  Each time a power of attorney is presented to a company, financial institution, or other person with an ex-spouse’s name listed as an agent, the question of why the ex-spouse is not acting will come up.  Each company or entity will want to see some sort of divorce decree or other paperwork as evidence the ex-spouse is no longer empowered to act, but even then many institutions may not readily know or acknowledge that the ex-spouse is no longer empowered to act on behalf of the former spouse.

Updating powers of attorney or wills or trusts eliminates this problem by removing any reference to the ex-spouse, and therefore eliminating any of the questions that may come up with various third parties who receive the power of attorney when the time comes to use it.

 

Proactively Updating Your Estate Plan Is the Best Way

As with any other aspect of estate planning, making your own plan is better than relying on the default statutes.  In the case of who gets assets from an estate plan, most people don’t want to rely on the intestate statute (which are the rules on how assets are distributed at death if no will or trust exists).  Similarly, most people don’t want to rely on the default statutes to remove an ex-spouse from receiving assets or being removed from positions of responsibility.  Certainly having the statues in place is a good thing, but just like you should plan ahead to have an effective estate plan in any case, you want to proactively update your estate plan after a divorce.

I do realize that after a divorce, someone is likely tired of dealing with attorneys, and may be a bit strapped for cash after paying attorneys’ fees for a divorce.  That is why it is nice to have the default statutes in place.  But, as soon as someone is up to it, updating an estate plan to eliminate any of your ex-spouse’s role in the estate plan is the best way to go.  If you find yourself needing to update your estate plan after a divorce, please click the button below to make an appointment and speak with an experienced estate planning attorney who can help you.