Divorce, Blended Families, and Your Estate: A Planning Guide

Divorce is an emotionally exhausting experience that can feel never-ending. Revisiting your estate plan is probably the last thing you want to do after many months negotiating your divorce settlement; however, estate planning is an important part of any divorce. It removes your ex from your legacy and reinforces your new reality, giving you complete control over your hard-earned assets and future decisions. 

In this article, I’ll explain my approach to estate planning after divorce, including consideration for blended families and other unique circumstances to fulfill your wishes. 

Under Colorado law, a surviving spouse inherits their deceased spouse’s estate unless otherwise specified in a will.

Colorado is one of the more than half of U.S. states with laws governing automatic revocation upon divorce. Once a Colorado divorce is final, an ex-spouse can no longer inherit from their former spouse’s estate or serve in roles like executor, personal representative, trustee, or agent in a power of attorney. This law holds even if you forget to update the documents after your divorce. 

Colorado’s automatic revocation law is a safety net, not a substitute for updating your estate plan after divorce. 

It’s important to underscore that automatic revocation has its limits; for instance, it doesn’t apply to legal separations. It also won’t fill the void left in your plan. 

1. Gifting Your Ex Your 401(k)

Your divorce decree will remove your former spouse’s right to the aspects of your estate governed by Colorado law; however, federal laws supersede state laws, and most estates include nonprobate assets, like a life insurance policy or a 401(k).

The Employment Retirement Income Security Act of 1974 (ERISA) regulates retirement assets. According to federal law, your plan’s administrator must pay the named beneficiary on file. 

A beneficiary change can occur only when the policyholder authorizes one. Suppose these accounts name your ex-spouse as your beneficiary at the time of your passing. In that case, your ex-spouse will be considered an irrevocable beneficiary and will likely receive these assets. 

Unfortunately, this situation plays out a lot, and it can be difficult for contingent beneficiaries to rectify. 

2. Passing Away With an Invalid Will

Updating your estate plan after a divorce can seem like an added expense, but, in most cases, the estate planning prices will be a fraction of the costs associated with probate litigation later. 

Forgetting to update your will after divorce can lead to confusion and unintended consequences for your loved ones. An outdated will may fail to clearly specify alternative beneficiaries, potentially leaving significant parts of your estate to be distributed according to Colorado’s inheritance succession order. 

These laws dictate how assets are divided among surviving family members when there’s no valid will, and those outcomes might be completely different from your actual wishes for your intended heirs. This can lead to your loved ones enduring a lengthy and costly court process to sort it all out. 

3. Disinheriting Your Children

Colorado’s automatic revocation laws don’t anticipate new marital relationships. Should you remarry and pass away without updating your estate plan, your surviving spouse would gain control of your assets. 

Upon divorce, your ex would lose access to your estate. If you have children from your previous marriage, they could be disinherited by your new spouse. This is also true of step-children. 

Your biological or adopted children are also vulnerable if your new spouse ever wishes to remarry. By not updating your estate, your widow could inadvertently pass your assets to their new partner rather than your children. 

4. Compromising Your Child’s Trust 

Colorado estate planning laws do not safeguard your assets from indirect inheritance. 

For instance, if the trust was established and funded (e.g., a living trust) during your lifetime to hold assets for your children’s education, those assets generally remain within the trust’s terms; however, if your will was intended to create and fund a trust for your children’s education upon your death, and your will hasn’t been updated, provisions related to your ex-spouse might be revoked by Colorado law.

This could result in an improperly funded trust for your children’s education. Consequently, your children could receive their inheritance outright as young adults, potentially without the protective oversight you intended, because the mechanism to create or fund the trust through the will is compromised. 

5. Relinquishing Control to The Courts 

Leaving critical financial and medical decisions to the courts if you become incapacitated is hardly anyone’s vision for their future. Unfortunately, it does happen. 

Because Colorado law doesn’t automatically appoint a new individual you trust to make financial or healthcare decisions on your behalf, the court is legally required to intervene. If you’re hurt in an accident or unexpectedly become ill, your loved ones would need to petition the court for a guardianship and/or a conservatorship to make personal and financial decisions for you. 

6. Subjecting Your Family to Probate Litigation

Vague language in a will can lead to disputes among surviving family members. Without an updated will reflecting your current intentions, your loved ones could become embroiled in a protracted court battle over your estate, incurring substantial legal fees and unnecessary stress. 

As you can see, estate planning attorneys play a crucial role in protecting your and your loved ones’ future. Working with the best estate planning attorney can be an empowering experience, saving you time, money, and hassle in the future. 

Here’s how I can help you: 

Many divorcing individuals wonder: Should I create a new will from scratch? Or can I amend my existing one? These are valid questions to ask an estate planning attorney. The recommended first step is to shred the preexisting will and create a new one. Each divorce is unique and can be subject to exceptions or special considerations, particularly when estate planning for blended families, if you have remarried. 

If Your Divorce Isn’t Final

You should update your estate plan even if your divorce is pending. In Colorado, the automatic revocation laws don’t apply to legal separations. 

When updating your estate plan, it’s crucial to understand who you should name as a beneficiary. Working with both an estate planning and divorce attorney simultaneously is one way to ensure all changes are consistent with legal guidelines and all aspects of your plan are accounted for. 

If you have worked numerous jobs, you may have retirement accounts you have forgotten about. We’ll run down a list of all possible assets that need changing, including:

• 401(k)s

• IRAs

• Life insurance policies

• Brokerage accounts

• Mutual Funds

• Stocks

Designating new agents for powers of attorney and healthcare directives is an important step in the divorce estate planning process. You should choose someone you trust to keep your best interests in mind and who has demonstrated the ability to make high-stakes decisions under pressure. 

We can discuss whether including a revocable trust in your estate plan would be prudent. A revocable trust allows you to avoid probate, keep your finances off the public record, and protect your wishes from contentious family members.

A trust is also a good option for:

• minimizing inheritance taxes.

• caring for disabled or special-needs dependents.

• safekeeping inheritances until dependents come of age, or conversely;

• allowing family members immediate access to inheritances by bypassing the probate process.

In the event of your death, your minor children will be placed with their other biological parent. If you believe that your ex-spouse should not get custody of the children, you can state so in your will; however, courts usually favor keeping a child with the biological parent unless there is a good reason.

If you have children with your current spouse, I encourage you to consider appointing a guardian should you and your spouse pass away unexpectedly. Formally designating a guardian ensures your wishes are clearly documented and legally sound.

Rewriting your estate plan can be an empowering step forward after divorce. Estate planning is one of our law firm’s specialties, and my team is committed to helping you develop a plan that honors your wishes in life and legacy. Call 303-688-0944 to begin your assessment.