What is an Estate Plan again?

Ok, real quick, let’s cover what an estate plan is so we know what we’re talking about. At its core, a basic Estate Plan would comprise of a Will, powers of attorney (usually one for finance, and one for medical), a Living Will, and various titling and/or beneficiary designations (such as life insurance, and pay-on-death provisions). 

Why Update During Divorce?

There are three primary reasons why you should consider updating your Estate Plan during your divorce. One, you have no idea when you’re going to pass away. Two, you have no idea how long your divorce is going to last. Three, the Arizona law that removes your spouse from your Will, and any fiduciary designations (such as a power of attorney) only takes effect once your divorce is final–not when you file for divorce.

I’ve litigated hundreds of divorce cases. I’d say on average a divorce case will last somewhere between 6 months and a year. However, I’ve had cases that lasted well over 18 months, and even some that went over two years. I’ve even seen cases that went as long as 3+ years. Sometimes, the delay can be outside your control. For instance, a new issue might arise that requires additional discovery, leading to further delays. Sometimes your trial can get continued at the last minute because the Judge has an emergency, or one of the attorneys gets very sick on the eve of trial (it happens), and the soonest rescheduled date is months away. The point is, you don’t know for sure how long your divorce will last.

Similarly, none of us know when our time will come. If you’re on the older side and/or have any health issues, then there are greater odds that you could pass away, or become incapacitated during your divorce. I’ve seen both happen. I’ve had a client pass away during divorce. I’ve seen other parties pass away during divorce. And I’ve had a client become incapacitated during divorce. They’re all possible.

These two uncertainties, combined with the fact that Arizona law doesn’t have an effect on your Estate Plan documents while you’re getting divorced, creates a compelling need to update your Estate Plan during divorce. 

Some Scary Situations.

Here’s a scenario for you. Let’s say you pass away during your divorce. What happens to your share of the marital assets? Well, unless you have a Will in place that gives your estate to someone other than your spouse (probably unlikely unless you updated your Will during divorce), then your spouse (yeah, the one you were trying to divorce) will get your property. Sucks, right? 

Let’s say you become incapacitated. If you have a power of attorney in place already, I’d assume that you named your spouse as your primary agent. Now, it’s very possible that your spouse could ultimately be removed as your agent due to the pending divorce. However, unless and until that happens, your spouse could wreak havoc on your finances as many third parties (such as your bank) might readily rely on your power of attorney without looking into whether an active divorce is pending. Moreover, your spouse could make things difficult if someone tries to remove him/her by lying about the circumstances of the divorce. For example, your spouse might try to argue to the probate court that he/she should remain as the agent of your power of attorney because you two were in the process of reconciling. Of course, you’ll be incapacitated so you won’t be able to say otherwise. Hopefully, such a tactic won’t work, but, as your divorce attorney hopefully told you by now, nothing is guaranteed in litigation. 

What If I Don’t Have an Estate Plan Yet?

The majority of American adults don’t have an Estate Plan in place, so if this describes you don’t feel bad. But, this should spur you to get your plan in place. Under the laws of intestacy (which apply if you die without a Will), and the appointment preferences for guardians/conservators (if you become incapacitated without a power of attorney), your spouse is right up there as the top person to inherit your share of the assets and be the one appointed to “take care of” you. 

Now, if you were to become incapacitated and needed a guardianship and conservatorship in the absence of a power of attorney, then chances are low that your spouse would be appointed as your guardian/conservator because of the pending divorce. However, as addressed above, it can’t be completely ruled out, and if nothing else, your spouse could cause a lot of headaches and trouble for your immediate family. This can cost you and your family a lot of money in the process. I’ve personally seen this happen to people. 

In sum, due to the Arizona laws, not having an Estate Plan in place during your divorce puts you in the same precarious situations as if you had an Estate Plan that centered around your spouse. 

Divorce Is Costly Enough. How Much Will this Cost?

Fortunately, I’ve created a simplified, Divorcing Estate Plan package that costs only $250.00, consisting of a simple Will, powers of attorney for financial and medical decisions, Living Will, and updated healthcare authorization. This is half of what our Basic Estate Plan package costs. The Divorcing Estate Plan is designed to protect you against the issues discussed above. Plus there’s more. 

I know how expensive divorce can be, and that covering one more thing can be challenging. I also recognize that putting together an ideal Estate Plan before the divorce is over is difficult because until it’s over you won’t know exactly what assets you are getting. This can create the need to plan twice: once during divorce, and then once again after the divorce when you have a clearer picture of the assets awarded to you in the divorce. No one wants to pay for two estate plans. I get that. My unbeatable offer to clients is that the $250.00 cost of the Divorcing Estate Plan will also be credited against any future estate planning services with my firm. For example, if you get the Divorcing Estate Plan, and then want a Basic Estate Plan after your divorce (to account for assets you may not have anticipated receiving in the divorce), then you would get $250.00 off of that Plan. This way, you can get the immediate benefit of updating your Estate Plan during your divorce, thereby avoiding the nasty possibilities discussed above, AND the cost of updating your plan won’t be lost or wasted should you want to update your plan again once your divorce is finalized. 

If you’re ready to update your plan, and make sure your soon-to-be-ex doesn’t inherit from you and/or exert control over you, contact me right away to get started with the Divorcing Estate Plan. 

Some Limitations On Planning During Divorce.

Some final thoughts. When a divorce is filed, one of the first court “orders” that goes into effect is the Preliminary Injunction. Under the Injunction, you (and your spouse) are prohibited from certain actions including dissipating community assets, encumbering community assets, and removing your spouse from certain insurance policies. Having said that, you are not prohibited from changing your Will nor updating/creating a new power of attorney. In that same vein, you are free to revoke any prior Will or prior power of attorney that likely has your spouse as inheriting from you and appointed as your primary agent. Thus, despite the limitations imposed by the Injunction, you are free to implement these basic estate planning techniques. 

If you and/or your spouse have a Trust, then some further planning and discussion are recommended before revoking the Trust and/or transferring assets out of the Trust. However, if the Trust is fully funded, then you will want to address this issue with your divorce attorney and estate planning attorney before updating your Estate Plan during divorce.