Divorce is a significant life event that can have a big impact on your estate plan. If you are a divorced parent, it's important to review and update your will to ensure that your assets are distributed according to your wishes. Here are some changes that you should consider making to your will when you get divorced.
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Draft a New Will
Failing to draft a new will is the top mistake people make when they get divorced. In some jurisdictions, if you fail to devise a new will then your ex-spouse could inherit your property. In most states, the law goes the opposite way and automatically invalidates any will provisions in favor of the former spouse. But that shouldn't give you a false sense of security because if you didn’t change your will, your ex can still drag your estate back to court.
That’s what happened to 80’s child actor Gary Coleman. In 2005 Coleman wrote a will making Anna Gray his beneficiary and executor. Gray was a friend who also ran Coleman’s company. In 2007 Coleman married Shannon Price. He added a codicil to his will which stated: “I have made this change of free will and was not coerced in any way. This I have done because of my personal selfishness and weakness and I love her with all of my heart.”
The first sentence is fairly standard legalese but the second is unusual. Coleman divorced Price in 2008 in a memorable episode of Divorce Court. When Coleman died in 2010 after sustaining a head injury, Price claimed that the couple had reconciled and were living as common law man and wife when he died. (She had been making healthcare decisions on his behalf after his accident because he had not updated his advanced directives!) Price argued that the codicil was therefore still legally valid. The case went to trial, where a judge found that Price had abused and cheated on Coleman. The estate was already very small, since Coleman’s parents spent all the money he made as a child star. By the time the trial ended, there was very little left to fight over except for Coleman’s ashes. Coleman wasn’t a parent, but this experience underscores why it’s so important to make a new will when you get a divorce. And by all means, avoid that poorly-worded codicil!
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Update the Executor
If your former spouse was named as the executor of your will, you may want to update this designation to avoid any conflicts of interest. It's important to choose an executor who will act in your best interest and carry out your wishes. Most people don’t want their former spouse to have that control, but in some situations, it works out.
For example, when Anthony Bourdain committed suicide in 2018, he was separated from his wife. Bourdain described the split as amicable and they continued to live together when Bourdain was not traveling. Bourdain’s will left most of his assets to his daughter but kept his wife as executor. He didn’t name a guardian for the assets he left to his daughter, who was still a minor, so he presumably trusted his wife to handle that role as well. Even though Bourdain was in a new relationship, his estranged wife was the one to plan his funeral and memorial. (He also left her his massive number of frequent flier miles.)
The lesson here is that if you maintain a close relationship with your spouse, you can keep that person as your beneficiary and executor. Just be sure that what you’re doing is intentional.
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Update Beneficiary Designations
Failing to update beneficiaries on accounts that don’t pass by will is another common mistake that people make. If you have life insurance policies, retirement accounts, and bank accounts, and your former spouse is still named as the beneficiary, that person will probably receive the payout upon your death. This is something to consider even if the divorce isn’t final yet.
Actor Dennis Hopper was in the middle of a contentious divorce battle with his fifth wife Duffy when he passed away. The wife had signed a prenuptial agreement but when it came time to divorce, she claimed that the actor’s four adult children exerted undue influence over him and that they forced him to do the prenup. Duffy was younger than all of his adult children. She and Hopper had a nine year old daughter together. Hopper didn’t wait for the divorce to become final to change his beneficiary designations. He removed his minor child as the beneficiary of a life insurance policy, which meant she would inherit the same share of his estate as his other four children, but she would not receive a cash payout that her mother would control. Hopper also immediately updated his will and trust. Duffy still tried to challenge the will - at one point even refusing a court order to leave the house - but Hopper’s actions saved his heirs a ton of money. Courts upheld the prenup and Duffy was forced to settle for a much smaller share than she wanted.
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Consider Creating a Trust
A trust can be an effective way to ensure that your assets are distributed according to your wishes and to provide for the financial needs of your children. However, creating the trust and then failing to fund it with assets is a surprisingly common mistake. Paul Walker had a pour-over will which passed everything he had into a trust upon his death. This was smart, but he failed to transfer assets into the trust before he passed away. One of the benefits of having a trust is to keep matters private but that didn’t work out in his case. Walker’s will had to be probated and it contained all of the details about his $25 million estate. If the trust had been fully funded before his death, there would have been nothing to pass through the will.
5. Name a Guardian
After divorce, you should reconsider who should serve as a guardian for your minor children in the event of your death. If you have any wishes about how your children are raised, you should include them in the will. This does not mean that your ex-spouse will lose custody of your minor children. In most situations, the former spouse will have full custody. However, life is unpredictable, as the tragic death of Paul Walker demonstrates. Walker made a good decision by naming his parents as his preferred guardians in his will. The media speculated that Walker must have thought his ex was not a suitable parent. That’s not necessarily the case, but Walker was planning for every possibility. What if his former spouse becomes unable to care for their child? What if she dies? Walker’s smart estate planning ensures that his wishes can be taken into account.
6. Update Your Will
Walker’s will was signed when he was 28 years old. Although it’s good that he had a will when he was still young, he never updated the will again. By the time he passed away, his parents were 12 years older and he had been in a new relationship for seven years. If he had updated his will could have provided for his longtime girlfriend. He also might have decided to name someone else as his daughter’s guardian since his parents might not be able to care for her. For more on the perils of not updating your will, check out this FastWill article, and be sure to update your will when your life changes.
