A divorce ends your marriage, but it doesn’t update your estate plan for you. Maryland law changes a few things on its own when a marriage ends. Everything else stays the way you and your former spouse set it up.
That’s where problems start. An old beneficiary form, a trust that names your ex to take over, or a power of attorney on file at the bank can still work in your ex’s favor. At Jimeno & Gray, our Maryland divorce attorneys help Anne Arundel County families update their estate plans to fit their lives after divorce.
Let’s look at all the ways getting divorced can affect your estate plan and what you can do. If you need to discuss practical steps for your future and the needs of any children or beneficiaries, contact our law firm today.
Key Takeaways:
- After your divorce, it’s a good idea to review your estate plan just to prevent any issues with your children and other beneficiaries.
- Check your will, any trusts that have been set up, your financial power of attorney, advanced medical directives, and who is listed as a beneficiary in your bank and retirement accounts.
- You will not necessarily have to name a guardian for your minor children unless you or your ex are unable to care for your children.
- If you are a business owner, be sure to review all paperwork regarding your business to avoid any issues with your ex and any business partners.
Why You Need to Change Your Estate Plan When Your Marriage Ends
After a divorce, your ex is no longer part of your family. But only a few Maryland laws remove your ex from your documents automatically. Those laws cover much less than most people think.
Anything those laws don’t cover keeps working just as it was written. Your ex could still be first in line for a retirement account. They could still make medical decisions for you. They could even manage money you set aside for your children.
Issues If You Do Not Update Your Estate Plan After Divorce
If you don’t update your plan, it could lead to results like these after you pass away:
- Your ex getting a retirement account you wanted to go to your children
- Your ex still making medical decisions for you
- Delays in Anne Arundel County probate while the court sorts out documents that don’t match
- A child getting their whole inheritance at once on their 18th birthday
- A business partner having to deal with a claim from your ex
Each of these problems can usually be fixed while you are healthy. If you wait, your children may have to fight about it in court at the hardest possible time.
Changing Your Will After a Divorce
Maryland law helps a little with your will. Under Maryland Code, Estates and Trusts § 4-105, a divorce or annulment cancels the parts of your will that relate to your former spouse. This happens automatically if the divorce came after you signed the will.
But the law only removes your ex. It doesn’t name anyone new. Say your will leaves everything to your ex and doesn’t name a backup. Then no one is left to receive that property. Instead, it passes under Maryland’s intestacy rules, which decide who inherits when there’s no valid will. That could mean relatives you never meant to include.
The divorce also removes your ex as your personal representative, the person who manages your estate after you die. If you didn’t name a backup, no one may be ready to take the job. Your ex can still inherit under your will only if the will or divorce decree clearly says so.
The safest choice is to sign a new will after your divorce.
Changing a Revocable Living Trust After a Divorce
You control your revocable trust, so you can change it as soon as your divorce is over. Maryland law may cancel some parts of the trust that name your ex. But it won’t name anyone new or rewrite the rest of the trust to fit your new life.
What to Consider When Reviewing a Trust After Divorce
Trusts written during a marriage usually assume two spouses working together. Take out your trust documents and check:
- Who is named to take over as trustee if you can’t serve
- Whether the trust divides property based on what you and your ex owned together
- Whether your ex has any power over the trust’s money
- Whether the trust holds property that your divorce decree gave to your ex
- Whether you and your ex share the power to change or cancel the trust
Changing a trust is usually easier than writing a new will, and our team can handle both at the same time. Don’t forget about your home. The deed recorded in the Anne Arundel County land records shows who owns it, so make sure it matches your divorce decree and your trust.
Setting Up a Trust for Your Children After a Divorce
Leaving money directly to a young child can cause problems. A child can’t manage money, so an adult has to do it. After a divorce, that adult is often your ex. A trust lets you choose who manages the money instead.
What to Consider When Setting Up a Trust
Most divorced parents want two things. They want their children taken care of, and they want someone other than their ex to handle the money. These choices can help with both:
- A Trustee Who Is Not Your Ex: You can name a brother or sister, a trusted friend, or a professional trustee. Your children still get the money, but your ex doesn’t control it.
- Payments at Different Ages: You can have the trust pay out in stages, such as at 25, 30, and 35. This keeps a young adult from getting a large amount of money all at once.
- A Spendthrift Clause: This language keeps creditors from taking money from the trust before your child receives it. It also makes it harder for a child to borrow against money they expect to inherit.
- Life Insurance Paid to the Trust: You can name the trust as the beneficiary of a life insurance policy. When you die, the money goes into the trust right away. The trustee can then use it for school, housing, and health costs.
You don’t need a lot of money for a trust to make sense. A small life insurance policy and a well-written trust often protect a child better than a larger amount given with no rules.
Changing Beneficiary Designations After a Divorce
Beneficiary forms cause more problems after a Maryland divorce than any other document. These forms name who gets an account or policy when you die. No Maryland law removes your ex from them. Even a divorce decree that says to change them doesn’t do it for you. Whoever is named on the form on file usually gets the money.
Federal law matters too. A federal law called ERISA covers most work retirement plans and many work life insurance plans. It generally requires the plan to pay whoever is named on the current form.
Check the Beneficiaries on These Accounts in Particular
Ask every company for a copy of your forms and make updates anywhere your ex is still listed:
- Work retirement accounts, such as a 401(k) or 403(b)
- Individual retirement accounts (IRAs) at a bank or investment company
- Life insurance through your job
- Pension survivor benefits
- Payable-on-death or transfer-on-death accounts
Ask for a written confirmation for every form you send in. Keep it with your other estate planning documents. A phone call won’t prove anything years from now.
Changing Powers of Attorney After a Divorce
In many cases, your spouse’s power to act for you ends before the divorce is even final.
Under Maryland Code, Estates and Trusts § 17-112, your spouse’s power as your agent usually ends as soon as someone files for divorce or annulment. It doesn’t wait until the divorce is final. The only exception is if your power of attorney says otherwise.
Issues Can Still Arise Even After a Divorce
Your bank may not know you filed for divorce. If your ex still has a signed copy, they might try to use it. To protect yourself, sign a new power of attorney. Cancel the old one in writing, and give updated copies to every bank or company that has the old one.
Health care documents follow different rules. In Maryland, a spouse usually can’t serve as your health care agent once either of you files for divorce or you sign a separation agreement. There are a few exceptions. Signing a new advance directive, which names who can make medical decisions for you, makes your wishes clear.
Will I Need to Make Guardian Designations for Minor Children?
In most cases, if you die first, your ex will keep raising your children. A surviving parent’s rights usually come before a guardian named in your will. The person you name matters most if neither parent can care for the children.
What to Consider If You Need to Choose a Guardian
Picking a guardian means thinking about practical needs, too. Think through these questions before you choose:
- Can this person keep your children’s routine steady without moving them far away?
- How do they get along with your ex’s family?
- Should one person raise the children and another manage the money?
- Who is your backup if your first choice can’t serve?
- What do you want to write down about school, religion, and medical care?
Talk to the person before you name them. Maryland judges decide based on what’s best for the child, not only on who you named. A person who has agreed ahead of time is more likely to be ready to step in.
Planning for Taxes and Inheritance When a Marriage Ends
While you are married, you can usually leave any amount to your spouse without paying estate tax. After a divorce, you lose that benefit, so property you leave to anyone else counts toward your estate tax exemption. Maryland also has its own estate tax on top of the federal one.
In Maryland, the first $5 million of an estate is exempt from state estate tax. That amount hasn’t changed since 2019, and it’s much lower than the federal amount. That means some estates owe Maryland estate tax even though they owe no federal estate tax.
Maryland also has a 10% inheritance tax, collected through the Register of Wills for Anne Arundel County. Children, grandchildren, parents, and siblings don’t pay this tax. A new partner you haven’t married may have to pay it.
When you’re married, one spouse can often use the other’s unused Maryland exemption after a death. After a divorce, that option is gone. If your plan was built around a couple’s combined exemption, it needs to be redone for one person.
Succession Planning for Your Business
If you own a business, it may be the asset most affected by your divorce. Your ex may have a claim to part of its value. Your business documents may also still give your ex a role in the company.
What to Consider If You Are a Business Owner
Business owners often forget to update ownership records after a divorce. Review these documents soon after your divorce is final:
- Buy-Sell Agreements: This type of agreement sets the price and the process if an owner leaves, divorces, or dies. Keeping it current helps prevent a rushed sale at a low price.
- Transfer Limits in the Operating Agreement: These rules keep an ownership share from going to someone your partners didn’t agree to work with. For example, the agreement can require the other owners to approve any transfer in writing.
- Key-Person Life Insurance: This insurance covers each owner. If an owner dies, it gives the business money to buy out their share instead of borrowing.
- A Written Way to Value the Business: Agreeing ahead of time on how to value the business prevents one of the biggest fights after a divorce. It also gives the people who take over a number they can rely on.
Your business documents and your estate plan need to match. If they don’t, a court may have to settle the conflict between the people you care about most. Fixing it now costs much less than a court fight later.
How a Lawyer Can Help Update Your Estate Plan
Updating your plan after a divorce takes more than crossing out one name. Your will, trust, beneficiary forms, powers of attorney, and business documents all connect. If you change only one, you could create the very conflict you’re trying to avoid.
Jimeno & Gray handles both family law and estate planning. The same Millersville office that reviews your divorce decree can also write your new estate planning documents. Our lawyers have helped Anne Arundel County parents, business owners, and retirees update both parts of their lives.
Contact Our Maryland Divorce Attorneys About Your Situation
Your divorce is final, yet your estate plan still names your ex. It is time for a change, and we are here to make this process as straightforward as possible. To request a consultation with our attorneys, contact our law firm online.