Estate planning after divorce

Estate planning is an essential step in the divorce process that is often overlooked. Careful attention must be afforded to the complex issues that may arise when dealing with an estate plan where a divorce action is pending or has been finalized. Your estate plan should be reviewed and updated after separation and before the initial filing of the divorce complaint as well as after the final decree of divorce has been entered.

Pennsylvania does have “safeguards” in place regarding divorce and estate planning. When someone divorces in Pennsylvania, there are statutory restrictions on how an exspouse is treated when named in estate planning documents. However, it is still necessary to update your estate planning documents for many reasons which we will discuss. It is also important to understand the statutory restrictions, when the restrictions are applicable, and to confirm that these alterations are consistent with your estate planning goals. Generally, there are three estate planning documents: (1) Last Will and Testament; (2) Financial Power of Attorney; and (3) Health Care Power of Attorney with a Living Will. Additionally, whenever discussing an estate plan, your non-probate assets which contain a beneficiary designation must also be reviewed.

Upon the filing of a divorce proceeding, the designation of your ex-spouse as your agent under your Financial Power of Attorney and the designation of your ex-spouse as your Health Care Agent is automatically revoked unless from the document it is clear that the designation was intended to survive the filing for divorce. If you and your spouse are separated, but the divorce has not been filed the power of attorney is still in full effect. Therefore, upon separation it is important to make sure that you immediately update your power of attorney documents if you no longer wish your spouse to be your agent.

Upon a divorce proceeding being filed and grounds for divorce being established, this invalidates any provisions in your Last Will and Testament favoring your exspouse. Therefore, your spouse would be treated as though he or she predeceased you. This can become a tricky area where there is a potential for minors to inherit from your estate. Careful drafting techniques must be used to create a testamentary trust on behalf of the minors, or alternatively, establishing an inter-vivos trust which would be named as the beneficiary of your will. You may also want to set up distribution guidelines for your trustee in the trust for your children to make sure that the money is not accessed in a way that would benefit your exspouse.

The complexity of estate planning during a divorce often arises where a divorce is pending; however, grounds have not yet been established. Or where you and your spouse are separated but the divorce has not been filed. Should you pass away in this interim period and you have not changed your will, your spouse will still inherit from your estate. Upon separation from your spouse you should meet with an attorney to review your estate planning documents in lieu of your impending divorce. It is also important to understand Pennsylvania’s spousal elective share rules if you have not filed for divorce, make sure to have your estate planning attorney explain this to you.

Another important consideration when divorcing is your beneficiary designations. Any designation of a spouse as a beneficiary of a life insurance policy, annuity contract, or other contractual agreement becomes ineffective upon divorce in Pennsylvania. Such a designation also becomes ineffective if the owner died during divorce proceedings after grounds for divorce have been established. However, employer-based benefits are treated differently. Employee Retirement Income Security Act (“ERISA”) preempts Pennsylvania law that mandates the revocation of beneficiary designations upon divorce. Therefore, you must make sure that these beneficiary designations are updated upon separation from your spouse.

The legal advice in this column is general in nature, consult your attorney for advice to fit your particular situation.

Rebecca A. Hobbs, Esquire is licensed to practice in the Commonwealth of Pennsylvania and is certified as an Elder Law Attorney by the National Elder Law Foundation as authorized by the Pennsylvania Supreme Court. She is a principal of the law firm of O’Donnell, Weiss & Mattei, P.C., 41 High Street, Pottstown, and 347 Bridge Street, Phoenixville,610-323-2800, www. owmlaw.com. You can reach Ms. Hobbs at rhobbs@owmlaw.com