Going through a divorce changes everything. Once the divorce is final, you are ready to move forward. But here is the problem: your estate plan probably still names your ex-spouse in multiple places, giving them control over assets and decisions you never intended them to have.
Not updating your estate plan after divorce can unintentionally leave assets to your ex-spouse or let them make healthcare decisions for you. This article covers how divorce impacts your will, beneficiaries, trusts, and powers of attorney, along with immediate steps to take with a divorce attorney in Howard County, MD.
What Maryland Law Does (and Doesn’t) Protect
Maryland law provides some automatic protections for wills. According to Maryland Estates and Trusts Code Section 4-105, an absolute divorce automatically revokes all provisions in your will relating to your former spouse. This indicates that your ex-spouse will not receive any inheritance from your will unless your divorce decree clearly specifies otherwise.
However, this automatic revocation only addresses provisions directly benefiting your ex. If you designated your ex-spouse as your personal representative or as a guardian for your children, those appointments could still be valid. You will have to draft a new will that designates suitable alternates.
The Beneficiary Designation Problem
Here’s where many people make a costly mistake: divorce in Maryland does not automatically change beneficiary designations on life insurance policies, retirement accounts, or financial instruments.
According to the IRS, if you divorce and wish to change your retirement plan beneficiary, contact your employer or plan administrator for the necessary forms, follow the instructions, and submit them with a copy of your divorce decree if required.
This means even if your divorce is finalized and your will is updated, your ex-spouse could still receive:
- Life insurance proceeds
- 401(k) or IRA account balances
- Pension benefits
- Payable-on-death (POD) bank accounts
- Transfer-on-death (TOD) investment accounts
Federal law (ERISA) requires plan administrators to pay retirement benefits to the last-named beneficiary on file, regardless of what your divorce decree says. The U.S. Supreme Court has confirmed this in multiple cases, ruling that retirement plans rely only on beneficiary designation forms, not divorce decrees, to determine who receives benefits.
Get in touch with every financial institution, insurance provider, and retirement plan administrator right away. Some companies allow online changes, but many require paper documentation. Follow up to confirm your changes were processed correctly.
Your divorce decree might require you to maintain your ex-spouse as a beneficiary on certain accounts, particularly life insurance policies that assure child support or alimony payments. Examine your decree thoroughly before implementing any modifications.
Powers of Attorney Necessitate Immediate Attention
Powers of attorney are of utmost importance, as they enable someone to make financial and healthcare decisions on your behalf if you become unable to act on your own. According to the National Institute on Aging, a durable power of attorney for finances appoints a person to handle financial decisions if you’re unable, while one for healthcare names your healthcare proxy.
In Maryland, a financial power of attorney granted to a spouse automatically ceases to be valid upon the filing of a divorce action. However, healthcare powers of attorney and advance directives don’t automatically terminate.
Unless you want your ex-spouse making life-and-death medical decisions for you if you become incapacitated, execute a new advance directive immediately. Make sure your healthcare providers have a copy in your medical chart.
Updating Your Trust After Divorce
If you created a revocable living trust while married, amend it quickly. You should officially modify your revocable trust to exclude your ex-spouse as a beneficiary, change your ex-spouse’s role as trustee or successor trustee, and revise the asset distribution plans to align with your current preferences.
Irrevocable trusts present more complex challenges because they typically cannot be changed after establishment. If your ex-spouse is a trustee or a beneficiary in an irrevocable trust, legal action may be required to change it. A Howard County, MD, divorce attorney with estate planning experience can help determine your options.
Why You Shouldn’t Wait
The risks of not updating your estate plan are real and immediate. Court cases across the country have shown that beneficiary designations and contractual arrangements often override divorce decrees and even updated wills. Neglecting to implement these changes might lead to your ex-spouse obtaining significant assets that you had intended for your children or other loved ones.
The best time to update your estate plan is right after your divorce has been finalized. Don’t wait until you’ve remarried or another major life event occurs. Every day that goes by with outdated documents increases the risk of unnecessary issues.
Connect with a Proven Divorce Attorney in Howard County, MD
At Milstein Siegel, we understand that divorce represents a significant turning point in your life. We work with clients throughout Maryland to update wills, revise trusts, change beneficiary designations, and create new powers of attorney after divorce.
Don’t leave your financial future to chance. Reach out to an experienced divorce attorney in Howard County, MD online or give us a call at (443) 230-4674 to arrange a consultation and develop an estate plan that aligns with your new circumstances and safeguards your legacy.