What does an estate actually mean?
Have you noticed that lawyers use the word “estate” a lot? Probate estates, trust estate, marital estates, etc. An estate refers to a certain bucket of total assets and debts, and there are special rules that apply to that bucket. The rights of different estates are interwoven, and a change in one estate will affect another. For example:
- Probate estate: bucket of assets that a decedent owns in their own name at death; a surviving spouse has rights in the probate estate.
- Marital estate: a bucket of assets and debts that a married couple has together; certain individual assets are excluded from the marital estate and included only in an individual estate.
The various rights that apply to these estates are affected by a divorce. The marital estate disappears. Each ex-spouse’s individual estates increases. Spouses’ rights disappear from will, and different people inherit.
Because a divorce is really a property breakup from a legal perspective, you’ll never know more about your assets and debts as you do after your divorce. This is an OPPORTUNITY to get on top of your finances, estate plan, and be ready for the future!
What happens to my estate plan after a divorce?
Wills and estate planning
When I got divorced, the marital estate ending also ended my ex-husband’s rights to my stuff if I died. A will can function in various ways after a divorce depending on how things are set up. Consider this first scenario: When I was married, I had a will that:
- gave everything to my husband, or
- if he died before me, gave everything to my sister.
Once we divorced, the law automatically terminated my ex-husband’s rights in the will. If I died, everything would go to my sister. I’m fine with my sister getting everything, but this might not work for everyone. For example, my situation wouldn’t work for me if I:
- Wanted my ex-husband to inherit my stuff (some people do!) or
- Didn’t like my sister anymore and did not want her to inherit my stuff.
A new will would have to be prepared if I wanted a different result.
Beneficiary designations and estate planning
Most married couples with wills name each other as beneficiaries. According to Michigan law, your will remains valid after divorce. However your ex-spouse is treated as if they died before you to effectively remove an ex-spouse from a will. This is also true for most beneficiary designations, but not all.
I’ve encountered some federal retirement plans where the ex-spouse was NOT automatically removed from the beneficiary designation. In those cases, the ex-spouse got a lump of cash and the surviving spouse was left with nothing (Seriously!). We asked the ex-spouse to give it to the surviving spouse “out of the goodness of her heart.” The ex-spouse told me to jump in the lake and took the cash. My client had no recourse against the ex-spouse because her deceased spouse was not intentional about his estate plan.
While this situation is rare, the point is to be intentional about your estate plan because there may be little traps like this that you can catch! Review your current estate planning documents and see if they still meet your needs.
Financial organization and estate planning
After divorce, you’ll know your finances like never before. This is VITAL information for estate planning and important to maintain for the rest of your life. A tool like a financial binder is gold to any caretaker that may have to help you.
Tip: Get into the habit of updating this information annually when you do your taxes.
Powers of attorney and estate planning
After my divorce, I needed help with some tasks that my ex-husband would have helped me with. I relied on a power of attorney to get similar help from people who have worked for me or my mom. After feeling sort of alone after my divorce, it was empowering to get more meaningful support.
Estate planning starts with a note in the calendar
After my divorce, I moved to downtown Marquette and had the most amazing summer with a couple other friends who were also divorcing. I had so much fun and legal work was the last thing I wanted to do! Roll with that vibe, but before you do, take 5 minutes to start your estate planning now.
Remember, estate planning is not a document. It is a process, and the objective of that process shifts throughout your life. In one month, put a note in your calendar to review your estate plan. Here are some things to think about:
- In one month, schedule a half hour for yourself to review your estate planning documents. These create the foundation for your estate plan. Do you need to make changes to this foundation after divorce? Have your estate planning goals changed? Map out a plan to meet these needs?
- If you don’t have estate planning documents, start your estate planning on a spare sheet of paper. Write down who you want to get your stuff when you die and who can help you make decisions if you need some help.
The other part of divorce for many includes children. If you have children, work with your ex-spouse to create a plan for who takes care of the children upon the death of either of you. If you need a hand, here are some ways that Taproot can help!
- Just Coaching ($175) – We work with you to figure out your estate planning objectives and which estate planning documents best fit your needs.
- Review and Coaching ($300) – I’ll review your current estate planning documents before we meet. We will identify your estate planning goals to see if any other documents need to be prepared.
- Estate planning documents ($500 per person plus $250 for a trust) – If after coaching you’ve decided to create new estate planning documents, I can help with that! Documents are available a la carte if only a portion of the estate planning kit is needed. Check out our website for more information!
Let’s keep the conversation going
As always, reach out to us by calling 906-284-8426 or emailing us at hello@taprootadvocates.com. We’re excited to work with you to help you move forward. In the meantime, stay tuned for more conversation about estate planning and elder law with Attorney John Yonkers (Marquette) in our next Green Space article!