How Does Divorce Impact Estate Planning in California?

Even when divorce feels like the best possible decision to move forward, such intense change and upheaval can still be stressful, especially when you are trying to make so many decisions that will impact your long-term future.

In the midst of negotiating your divorce settlement and planning for your new post-divorce life, it’s easy to overlook estate planning. Creating or updating your estate plan can feel like an additional burden during an already tumultuous time, but it’s important to understand the implications of how divorce can impact estate planning and why it’s important to make plans that you feel comfortable with rather than leave things to chance.

In California, divorce can complicate estate planning. The state places certain restrictions on changing an existing will or trust during a divorce. Moreover, it’s important to be intentional about estate planning after divorce to ensure your assets are properly protected and distributed according to your wishes in the event of your death or incapacity.

Estate Planning During the Divorce Process

As soon as you file for divorce, the state places certain restrictions on what actions you can take concerning your estate. These rules are designed to ensure that spouses do not transfer assets that belong to the community before a divorce settlement is negotiated and finalized.

If you or your spouse has filed for divorce but your divorce has not yet been approved by the court, you are prohibited from “transferring, encumbering, hypothecating, concealing, or in any way disposing of” property out of community property accounts without your spouse’s written consent or a court order. Typical day-to-day expenses are, of course, exempt from this restriction.

You are also prohibited from “creating a non-probate transfer or modifying a non-probate transfer” without the written consent of your spouse. Non-probate transfers include:

  • Revocable trusts
  • Joint Tenancies
  • Beneficiary designations
  • IRAs
  • Profit sharing pension plans
  • Life insurance

This means, for instance, that you can create a trust but can only fund it subsequent to the finalization of your divorce settlement.

During your divorce proceedings, you may also do the following without violating these restrictions:

  • Execute, update, or revoke your will – You cannot, however disinherit your spouse from community property, though you can leave your half of community property to a person of your choosing.
  • Name guardians for your minor child – Keep in mind that your spouse will likely be given custody of your shared children in the event of your death, but you can still name a guardian in case they cannot or will not take custody.
  • Revoke powers-of-attorney and advanced health care directives – Understandably, many people don’t want their soon-to-be ex to be named as their legal agent if either of these become necessary.

This is a complex area of law, and it is important that you consult an experienced estate planning attorney who can help you decide how best to protect yourself and your heirs during a divorce.

Estate Planning After Your Divorce Is Finalized

Once the divorce has been finalized, there are certain changes that happen automatically as a result of your marriage being dissolved. In the absence of any directives to the contrary, your divorce will revoke your ex-spouse as an heir to your property, as an executor of your estate, or as possessing power-of-attorney on your behalf.

Even with these automatic legal changes, however, there can still be uncertainty if you do not update your estate plan following a divorce. These changes also will not disinherit your spouse from any insurance policies or retirement plans in which they are your named beneficiary. Such issues can lead to expensive and time-consuming litigation for your heirs. It’s essential that you create a proper estate plan in order to avoid such a scenario.

Update Your Will and Living Trusts

One of the most important steps you should take following a divorce is to update any existing wills or trusts you have. This process should involve a review of all beneficiaries and executors, ensuring that any parties related to your former spouse, such as children from a previous relationship, are either removed or added according to your wishes. It is also important to ensure that any assets previously held jointly with your ex-spouse be distributed properly upon death, as well as making sure that any assets held in trust are transferred accordingly.

Update Power-of-Attorney and Advanced Health Care Directives

Another important step is to make sure that health care directives and power of attorney documents are updated with new names and contact information for those listed on these documents. It may also be necessary to create additional documents granting permission for certain actions such as allowing medical decisions if you become incapacitated or unable to communicate their wishes.

Update Named Beneficiaries

One of the most essential steps in this process is to update any named beneficiaries on life insurance policies, retirement accounts, pay-on-death accounts, and other financial accounts. This will ensure that the assets are distributed according to your wishes if something were to happen to you.

Failing to update your estate plan after a divorce can result not only in assets being distributed incorrectly, but it may also mean that decisions you would have wanted made on your behalf may be not be honored if you become incapacitated or otherwise unable to communicate your wishes. While updating an estate plan can seem daunting, especially when you’re going through a divorce, doing so will help give you peace of mind knowing that your wishes will be carried out and your heirs will be protected if anything should happen to you.

How Palmer Rodak & Associates Can Help

At Palmer Rodak & Associates, we understand how important it is to update your estate plan after a divorce. Our experienced attorneys practice both family law and estate planning, which allows us to provide comprehensive advice and assistance when it comes to updating an estate plan during or after a divorce.

If you are going through a divorce and are concerned about estate planning, contact us online or call us at (760) 573-2223 to schedule a consultation.