How Gray Divorce Affects Your Estate Plan

The incidence of divorce among couples in their fifties, sixties, and beyond has nearly doubled in the past thirty years. The reasons for the increase in so-called “gray divorces” are many and varied, but the outcome is that more and more older couples are facing estate planning challenges they didn’t expect.

Divorce presents financial issues at any age. For younger couples, those issues often revolve around child support. For older couples, they tend to center on matters such as spousal maintenance, division of assets, and estate planning. Older couples tend to have more assets than younger couples, and what happens to those assets is a matter of more immediate concern. If you find yourself facing a “gray divorce,” here are some estate planning matters you need to think about.

Last Will and Testament

In Minnesota, a divorce invalidates a bequest to a former spouse in a will that was made before a divorce. That doesn’t mean that you should let your divorce take care of updating your estate plan by default. It is always better to have a current will that reflects your current wishes than to have an older, outdated will submitted to the court.

If an outdated will is probated, the court would need to receive information that you were divorced after the date of the will and declare any bequests to your former spouse invalid. Also, if the outdated will named your former spouse as your personal representative, the court would need to appoint a new personal representative. It’s simply easier, less time-consuming, and more cost-effective to update your will.

When should you update your will — before or after your gray divorce? Most divorce and estate planning attorneys would say that you should do it even before your divorce is final. Remember that during the divorce process, you are still married. That means your spouse would still be entitled to inherit under your will the day before your divorce becomes final, unless you update it to reflect who you want to inherit after your divorce.

Trusts

As with wills, Minnesota law regarding trusts revokes trust provisions in favor of a former spouse, treating the former spouse for inheritance purposes as if he or she died on the date of the divorce decree. This applies to trusts with a sole settlor (person creating and funding the trust) who has the power to amend or revoke the trust. So if you have a revocable living trust, your divorce should mean that your ex-spouse will not be able to benefit from it. If you have a joint revocable living trust with your spouse, talk to your estate planning and divorce attorney about how to terminate the trust and how assets in the trust should be divided between you in the divorce. You will probably want to create a new trust for your share of the assets.

Health Care Directives

If you have appointed your spouse to make decisions on your behalf in a health care directive (also known as a health care proxy or medical power of attorney), the appointment is revoked by the commencement of a divorce. That means once you or your spouse files for divorce, neither of you can act as health care proxy for the other.

This is probably a good thing; not many people would want their estranged spouse to have the power to make life and death medical decisions on their behalf. But it also means that you should be on alert to create new health care directives as soon as the divorce begins, or even before.

Financial Power of Attorney

A durable financial power of attorney allows a person you designate (your agent) to make financial decisions and transactions for you if you become legally incapable of making them for yourself. Minnesota is one of a minority of states in which a former spouse is no longer eligible to serve as agent upon commencement of a divorce if the power of attorney was executed before the divorce.

However, as with other estate planning documents, it is wise to revoke existing powers of attorney and create new ones early in the divorce process. Remember that you must notify the agent of the revocation for it to be effective; there is no such thing as a “secret” revocation of a durable financial power of attorney.

Retirement Benefits

With many older couples, one spouse was a stay-at-home parent or lower earner and the other earned significantly more; the couple likely planned their retirement years based on the higher earner’s retirement benefits. Unfortunately, in a gray divorce, there is little time for a lower-earning spouse to go out and get a job allowing them to accrue their own benefits.

For an older couple, retirement plans may be one of the most significant assets subject to division in divorce. It is important to discuss the disposition of retirement benefits with your divorce attorney.

Long-Term Care Planning

Older couples, particularly those with significant assets, may have begun planning for the possibility that they will need (and need to pay for) long-term care. To qualify for Medicaid benefits for nursing home care, some people transfer assets out of their own name early to avoid the “look-back period” and having those assets consumed by nursing home costs. To avoid running afoul of the law, transfers should be made only after consulting an experienced estate planning attorney. For older couples, long-term care planning for their soon-to-be-separate assets should be part of the divorce settlement process.

If you are faced with the prospect of gray divorce, estate planning should go hand-in-hand with your divorce process. We invite you to contact Mundahl Law to schedule a consultation.