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Divorce and Your Estate Plan

David Silver teaches The Legal Environment of Business in ECU's Department of Finance. Dave is also a Partner with The Graham.Nuckolls.Conner Law Firm in Greenville, NC, concentrating in Elder Law

A separation or a divorce is a very traumatic experience. With so much emotion, thought and effort usually being expended in the divorce process, it is easy to neglect to pay attention to your estate plan both during and after the divorce process. In North Carolina, certain parts of your estate plan are automatically affected by a divorce, while other aspects do not change unless you specifically make the changes. In order to avoid outcomes that you might find very disturbing, you should be familiar with how your estate plan is affected by both separation and divorce.

If you created a Will prior to the divorce, then anything in that Will that is for the benefit of your ex-spouse is automatically revoked by the divorce. This could cause a problem if you still want your ex-spouse to be your executor or inherit from your estate. This automatic revocation does not occur if you are merely separated unless the matter is specifically addressed in a separation agreement that has been filed with the Clerk of Court. A revision of your Will is almost always advisable.

A divorce also automatically revokes an ex-spouse's authority to make health care decisions for an incapacitated former spouse through a Health Care Power of Attorney (HCPOA) that was created prior to the divorce. If you still want your ex-spouse to be your health care agent, you should create a new HCPOA after the divorce. If you are merely separated, the HCPOA in favor of your spouse is still valid. If you don't have a HCPOA, then your separated spouse will still have the authority under the NC Statutes to make health care decisions for you if you become incapacitated. If you are uncomfortable with the idea of your separated spouse making health care decisions on your behalf, you should create a new HCPOA immediately.

A Power of Attorney (POA) is not automatically affected by a separation or a divorce. If you do not want your separated spouse or ex-spouse to be able to take financial actions on your behalf, you need to revoke any existing POA. This can be done by simply tearing up all the original POAs that you signed. If a POA has been recorded with the Register of Deeds, you will need to file a Revocation and provide notice to your ex-spouse.

The beneficiary designations for life insurance policies, Pay on Death designations on your bank accounts and Transfer on Death designations on your investment accounts are not automatically revoked by a separation or a divorce. Unless the insurance company, bank or investment company has specific contract terms to the contrary, they will deliver the funds to the named beneficiary upon receipt of the death certificate, even if the named beneficiary is an ex-spouse and you have since remarried. Even if this issue is specifically addressed in a formal separation agreement, it will be necessary to update the beneficiary designations on all of your accounts.

If you should die before you are divorced or before you have entered in to a formal separation agreement, your separated spouse still has the right to object to your Will, receive an intestate share of your estate if you don't have a Will, claim a life estate in your property, claim a year's allowance of your personal property up to $30,000.00, and has the right to administer your estate. Your separated spouse could lose these rights if your other heirs can prove that your spouse voluntarily separated from you AND lived in adultery, or they can prove that your spouse willfully and WITHOUT just cause abandoned and refused to live with you and was not living with you at your death (I am sure your heirs will have fun arguing about "just cause" with your separated spouse). The best way to avoid this potential mess is to not die, but if that can't be guaranteed then a formal separation agreement should be obtained as soon as possible.

After the divorce, you are eligible to obtain social security benefits through any ex-spouse as long as you were married to that person for 10 years, are over 62, are not currently married, and the ex-spouse's benefits are greater than your own. This will not affect your ex-spouse's benefits.

The most common mistake is to simply assume that moving out or getting a divorce fixes your estate plan. You should attempt to obtain a formal separation agreement and then follow up with a review of your estate plan in order to keep control of your estate.

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