Going through a divorce is never a pleasant experience. Divorces impact and disrupt family, financial and personal matters and are normally emotionally charged events in the couple’s life. Divorces also impact decisions that were made in regards to estate planning while the couple was married. It is important to know how a divorce will impact your estate planning and the decisions and selections you made during that process.
Over the last twenty years or so, Texas law has been modified to address concerns which may arise in estate planning when a couple divorces. In Texas, the law provides that if after making a Will there is a valid divorce, then all provisions in the Will, including all fiduciary appointments, shall be read as if the former spouse predeceased the testator. This provision also applies to any relative of the former spouse who is also not a relative of the testator. What this means is that any former spouse or former step children of such former spouse will no longer inherit anything under the previous spouse’s Will once the divorce is final. The one exception to this rule is if the Will explicitly states that in a case of divorce the previous spouse or step children will still inherit. This provision applies to fiduciary appointments, like trustee or executor. So, if your former spouse is listed as an executor or trustee, then such former spouse is treated as pre-deceasing the decedent, and the successor executor or trustee you named will be called on to act. These provisions do not apply however to someone who executes a new Will after a divorce, and names the former spouse as a beneficiary or fiduciary.
The laws regarding trusts are a little different. The impact of a divorce on fiduciary and beneficiary designations will depend on whether the trust is revocable or irrevocable. If you have a revocable trust set up, then after divorce your former spouse will automatically lose any beneficiary status within the trust. If you have set up an irrevocable trust then regardless of a divorce, the prior spouse will still inherit and be considered a valid beneficiary. If you decide to create an irrevocable trust, be sure to understand that your spouse will inherit the assets even in the event of a divorce.
Even though these provisions are designed to assist divorcing parties, these provisions should only be relied upon as a “fall back”. It is very important to update your documents to reflect your current wishes and desires. We have only touched on a couple of the documents that a divorce can impact, but it can also effect any financial accounts, life insurance, IRA’s and powers of attorney that were made while the couple was married. If you would like further information on anything discussed in this article, please contact us to set up an appointment.