estate plan after divorceIn the middle of a divorce the last thing on your mind is estate planning. However, when your divorce is finished, you should put your financial house in order. Sections of the Texas Family and Estate Code will protect your assets from a former spouse. However, those statutes say nothing about who will inherit your estate. To make certain your assets pass to your loved ones, you should meet with an experienced estate planning attorney. A basic estate plan includes:

  • A will
  • A power of attorney
  • A medical power of attorney
  • A directive to physicians
  • A HIPAA release

A will determines how assets are distributed. A general power of attorney grants another person the power to act if you are unable to handle your own affairs. A medical power of attorney gives another person authority to make health care decisions when a physician certifies you are incompetent. A directive to physicians communicates your wishes about end-of-life care. Finally, a HIPAA release is an authorization to disclose protected health information to listed individuals.

The Texas Estate Code revokes your former spouse’s rights under a will or trust. However, the Estate Code only controls who will not inherit assets; it’s no substitute for a new estate plan. Only a new plan can assure that your assets will be distributed according to your intent. Section123.001 states that if you are divorced, all provisions of your pre-divorce will shall be read as if your former spouse and each relative of the former spouse did not survive you. Also, any provisions of the will that transferred property to an irrevocable trust shall be read as if your former spouse has given up her interest. Moreover, if a former spouse was named trustee of a trust, he will be treated as not having survived you.

The Texas Legislature drafted Chapter 123 of the Estate Code to protect you from giving assets to a former spouse. However, it’s not easy for an executor to handle your estate based on a will drafted prior to divorce. The pre-divorce will must be read in conjunction with the Texas Estate Code and the Texas Family Code, which only determine what can’t happen. This is needlessly complicated and potentially dangerous for your descendants because unexpected events can happen. Far better to draft a post-divorce estate plan clearly stating who shall take assets when you die and who will hold your power of attorney and medical power of attorney.

The Texas Estate Code also limits the rights of a former spouse to exercise a power of attorney or enjoy the benefits of an insurance policy or a retirement plan. For example, §751.053 of the Texas Estate Code states that unless a durable power of attorney is drafted specifically to survive divorce, the agency of a former spouse terminates when you are divorced. However, the Estate Code does not replace a former spouse with another agent. To do that, you need a post-divorce estate plan.

Section 9.301 of the Texas Family Code terminates the designation of a former spouse as beneficiary of a life insurance policy, unless the Divorce Decree specifically redesignates the former spouse as a beneficiary, you redesignate your former spouse as a beneficiary, or your former spouse is designated to receive the insurance proceeds as a trustee of your children. Texas Family Code §9.302 terminates the designation of your former spouse as a beneficiary of any individual retirement account, employee stock option, savings plan, bonus, profit-sharing plan, or other benefit plan in force at the time the decree is final. However, if the divorce decree redesignates your former spouse as a beneficiary, you redesignate her as a beneficiary post-divorce, or she is designated to receive the proceeds of the employee benefit plan as a trustee for a child of the marriage, the redesignation stands.

These statutory protections prevent your former spouse from taking assets if you die. However, many people don’t name alternate beneficiaries in their will, insurance policies, pensions, or other employer compensation plans. Even if they do, the assets may pass to their minor children through the custody of an ex-spouse as a constructive trustee for their children. This is a situation ripe for misunderstanding at best and susceptible to fraud at worst. Better to draft a new estate plan to make certain your client’s assets pass to loved ones without falling under the control of a former spouse.