If you have or will soon have an ex‑spouse, believe it or not, he or she may still have power over your medical and financial affairs after your divorce.
This would send shockwaves through most people knowing that their ex‑spouse may still have any control over them after they part company. This is why it is important to update your beneficiary designations and other estate planning documents to prevent your soon‑to‑be ex‑spouse from inheriting money or remaining in positions of authority.
I know that wills, trusts, retirement plans, healthcare directives, etc. are typically the last thing on your mind if you are going through a divorce. There are enough other, more pressing, legal matters to sort through and plan for while handling a divorce, which can cause estate planning to feel like an added burden during an already difficult time.
Because of this, in recent years New York statutes have tried to keep up, but there still are some holes. There are also some things that you need to consider that the New York statutes don’t (or can’t) take into account.
The first hole is if you become incapacitated during or after the divorce proceedings. Your soon‑to‑be ex‑spouse may still have authority over your medical decisions. In the event of a serious health care crisis or future disability, it is critical to have someone you trust. The statutes primarily talk about financial matters and it is questionable whether they include health care matters.
Your healthcare directives (known as a health care proxy and living will in New York) name the party who can make medical decisions on your behalf if you are unable to make those decisions. If you do not amend these documents, your ex‑spouse may still have the power of making life and death decisions for you or managing your future healthcare needs. Most people would wince at the idea of their ex‑spouse (or soon‑to‑be) having this ability.
Keep in mind that the New York laws say that for wills, trusts, powers of attorney, etc., if there’s a divorce (or legal annulment) it’s as if your ex-spouse predeceased you. That means that the person you named as successor or contingent takes over. That may be a good thing or it may be something you need to re-think. Do you want the asset to go to your kids or your brother that you named as successor beneficiary, or do you want part of it to go to your new, live-in girlfriend?
The other hole is that these are New York statutes we’re talking about. There is no similar federal statute. Many insurance and retirement plans (such as 401(k), 403(b), FEGLI and other federal plans, and programs for federal government employees) are not covered under the New York provisions. Not that I’m big on citing case law, but there actually was a recent U.S. Supreme Court decision (Hillman v. Maretta) that stated exactly that. If the beneficiary designations are wrong or weren’t updated after the divorce, that’s too bad. Whoever was designated gets the asset. Federal law trumps New York law and it therefore does not apply to federal programs.
The bottom line is that even though your estate planning documents may not be an immediate concern during your divorce, they are a concern and should not be ignored. They should be reviewed and updated as soon as possible before a crisis occurs.