Estate Planning After Separation or Divorce
If you are going through a separation and/or divorce, it’s important to review your estate plan as early as possible. While many people wait until the divorce is finalized before they revisit their will, power of attorney, trusts, and other similar arrangements, you should start the process when you know you intend to file for divorce. In North Carolina, you are eligible to file for divorce only after being separated for at least a year and a day. As such, there will be a considerable period in which you are separated, but not yet divorced. Updating your estate plan immediately will prevent your spouse from inheriting or gaining control over your assets if you die or become incapacitated before the divorce is final.
North Carolina law states that after the granting of an absolute divorce, all provisions in your Will in favor of your former spouse are automatically revoked. However, the exclusion does not take effect until the divorce is finalized. A legal separation has no effect on the provisions of a Will or the applicable intestate succession laws. If you are legally separated and have not executed a separation agreement, you should have a Will or trust in place. Even if you execute a new Will, your spouse can file an elective share claim upon your death. However, the right to an elective share can be waived in a separation agreement.
If you have a revocabletrust, provisions for your former spouse will be nullified by divorce. However, irrevocable trusts are more complicated since they are similar to contracts. If you have an irrevocable trust that names your former spouse as a beneficiary, the provision in favor of the former spouse may remain effective notwithstanding separation or divorce. For this reason, irrevocable trusts should include language stating that divorce nullifies any former spouse’s claim.
Powers of Attorney
In North Carolina, a legal separation has no effect on the provisions of a power of attorney. An agent’s authority under a power of attorney is automatically terminated when the court enters a divorce decree (unless the power of attorney states otherwise). To prevent the possibility of your estranged spouse having the power to make financial or medical decisions for you during legal separation, see an estate planning attorney as soon as possible.
Assets that let you designate a beneficiary (such as life insurance policies, retirement plans, and annuities) are not controlled by your Will or trust. Rather, they will be paid directly to the person you have listed as your beneficiary. Neither a separation nor a divorce automatically revokes a beneficiary designation in favor of a former spouse. Therefore, if you designated your spouse as a beneficiary while you were married and you don’t want them to benefit from such an arrangement, change your beneficiary designation as soon as possible.
It’s important to keep in mind that the terms of any prenuptial, postnuptial, and separation agreements or Orders that were signed or entered into as a result of the relationship and separation and/or divorce should be consistent with your estate plan. If you are in the process of getting separated and/or going through a divorce, Harvell and Collins, P.A. can help you protect your estate by ensuring that all your estate planning documents and beneficiary designation(s) are properly updated.