Estate Planning Updates After Divorce: What Steps Should I Take?
By: Gordon & Perlut, LLC
When you are in the process of getting divorced in the Chicago area, you are likely focused on immediately relevant issues, such as the division of marital assets and liabilities, and issues pertaining to parental responsibilities. It is often difficult to think through all the steps you will need to take after your divorce is finalized as a result of a dissolution of marriage.
One important area of the law you do need to consider after your divorce is finalized is estate planning, or trusts and estates law. Whether you have previously worked on estate planning documents or have no idea what estate planning involves, it is essential to make certain estate planning updates after your divorce.
Estate planning is an area of the law in which you make various decisions about what will happen to assets after your death – as well as decisions about how you want your healthcare to be managed in the event you are unable to make those kinds of decisions for yourself. Since most estate planning decisions for married couples involve both spouses, after a divorce is finalized, it is necessary to reconsider various issues pertaining to trusts and estates in Illinois. The following are some steps you should take after your divorce.
The Illinois Probate Act governs most legal issues related to wills in Illinois. If you have a will created during your marriage, chances are good you have left most if not all of your property to your spouse. Simply getting divorced does not result in any automatic changes to your will that you will almost certainly want; you will need to make revisions to your directives after your death.
In the event of your death, your retirement accounts and insurance policies have beneficiaries listed. Most married couples will list their spouse as the beneficiary. For most recently divorced spouses, it is important to change the beneficiary from your ex to an adult child or another family member. Although there are some protections, if you were to unexpectedly die and did not make this change, your ex-spouse could be entitled to funds in your accounts.
Advance directives are various documents allowing other people to make financial and health decisions for you in the event of your incapacitation. For example, a power of attorney for property allows another person to make decisions on your behalf about property – if you become unable to do so, while a power of attorney for healthcare allows another individual to make decisions about your medical treatment – if you become incapacitated. Most married couples will give a spouse power of attorney. After your divorce, you will likely want to update these documents to name someone new to make these kinds of decisions.
Yes, it is essential to update your will following a divorce. According to Illinois law (755 ILCS 5/4-7), provisions in your will that designate your ex-spouse as a beneficiary are automatically revoked. However, this revocation applies only to gifts and appointments made before the divorce was finalized. Therefore, it is crucial to take the following steps when revising your will:
Consider how your relationships and financial situation have changed and make any necessary adjustments to how you want your assets distributed.
Beneficiary designations on non-probate assets such as life insurance policies and retirement accounts typically remain valid unless you actively change them. Under Illinois law, beneficiary designations are not automatically revoked upon divorce. This includes:
Life Insurance Policies – Your ex-spouse may still be the named beneficiary unless you update this designation.
Retirement Accounts (e.g., 401(k), IRA) – Your ex-spouse could inherit these assets if you do not make changes.
Payable-on-Death Bank Accounts – Similarly, these accounts will not automatically update to exclude your ex-spouse. To ensure your assets are distributed according to your current wishes, you must contact each financial institution and update these designations in writing.
Absolutely. Powers of attorney for healthcare and property typically name your spouse as the agent responsible for making decisions on your behalf. While Illinois law automatically revokes these appointments upon divorce, it is wise to take proactive steps to ensure that your wishes are honored:
Create New Powers of Attorney – Establish new documents that appoint trusted individuals who align with your current values and preferences.
Choose Trusted Individuals – Reflect on who you want to act on your behalf, considering individuals who can make crucial decisions in situations of medical emergency or financial incapacity.
Prevent Confusion – By updating these documents, you can avoid any potential disputes or confusion regarding who has the authority to make important decisions for you.
It is important to thoroughly review all trust documents following your divorce. If your ex-spouse is named in any of the following roles, you will need to take action:
Trustee – If your ex-spouse is serving as the trustee, it is crucial to replace them with someone you trust to manage the trust according to your intent.
Beneficiary – If they are designated as a beneficiary, consider amending the trust to redirect those benefits elsewhere.
Guardian of Minor Children’s Inheritance – Ensure that your children’s inheritance is protected by revising any provisions that allow your ex-spouse access to these funds. Additionally, you might consider creating new trusts to secure your children’s financial future and ensure that funds meant for their care or education are properly allocated and managed.
Guardianship designations are critical components of an estate plan, particularly for parents with minor children. In light of your divorce, it is vital to align these designations with your current custody arrangements, which may have been established in your divorce decree:
Name Appropriate Guardians for Minor Children – Designate individuals who reflect your parenting philosophy and values.
Include Backup Guardians – Consider naming secondary guardians to ensure that your children are cared for in the event that your primary choice is unable or unwilling to serve.
Reflect Your Parenting Philosophy and Family Relationships – Your estate plan should clearly communicate your wishes regarding the care and upbringing of your children, taking into account any changes in your family dynamics.
Yes, the management and distribution of digital assets are also impacted by divorce. As digital assets become more common, it is essential to address them in your estate planning:
Update Access and Ownership – Review the access rights and ownership of digital assets, including cryptocurrencies, online accounts, and digital media.
Reassign Control of Digital Platforms – Update who has access to your online banking, PayPal, Venmo, and other digital payment accounts to ensure that only trusted individuals can manage these assets.
Ensure Your Estate Plan Accounts for Evolving Asset Types – Your plan should address new types of assets that may not have existed when your initial estate plan was created.
Neglecting to update your estate plan can lead to unintended consequences regarding how your assets are distributed upon your death. Without timely revisions:
Your ex-spouse may inherit unintended assets – This could include valuable properties, funds, or other assets you do not wish to pass to them.
Estranged relatives could receive property – If your estate plan is not updated, relatives you may not want to benefit from your estate could inherit according to outdated provisions.
Your children’s inheritance may be mismanaged – Failure to designate the appropriate guardians or trustees can result in mismanagement or improper allocation of your children’s assets. In such cases, if your will is deemed outdated or invalid, Illinois intestate succession laws will dictate how your estate is divided, potentially leading to outcomes that do not reflect your current intentions.
Ideally, you should update your estate plan immediately after your divorce is finalized to reflect your new circumstances. Moreover, it is advisable to revisit your plan periodically to ensure it remains current:
After Major Life Changes – Life events such as remarriage, the birth of children, or relocation to a new state should prompt a review of your estate plan to address any new dynamics or regulations.
Every Few Years – Regularly revisiting your plan, at least every few years, can help ensure that it remains aligned with your financial goals and complies with any changes in laws that may affect your estate planning. By addressing these critical aspects of your estate plan after a divorce, you can safeguard your assets and ensure that your wishes are followed in the event of unforeseen circumstances.
Going through the legal issues in a divorce case can feel complicated, and we know you might not want to think about estate planning immediately after your divorce is finalized. However, failing to reconsider estate planning issues can have serious consequences. One of the experienced Chicago divorce attorneys at our firm can speak with you today about your situation and some of the specific estate planning issues you should revisit. Contact Gordon & Perlut, LLC at 312-360-0250 to learn more about how our lawyers can help you with estate planning updates after your divorce.