Many clients ask what they should do about their estate planning after a divorce. In general, a Divorce extinguishes any rights that the ex-spouse had in the estate of the other. A Will clause that leaves assets to “my wife, Jane Smith” will be voided by a divorce, the gift will fail, and it become part of the “residue” of the estate. If the ex-spouse is named as the beneficiary of the residue, then that gift will fail as well, and the Court will use the intestate distribution rules to give the residue to the children or other heirs-at-law.

However, it is wise to change all estate planning documents to avoid any questions or ambiguity. It is especially important to review and update beneficiary designations for life insurance and other assets such as Individual Retirement Accounts.

The New Hampshire Supreme Court ruled on the issue of an IRA and an ex-wife as the named beneficiary. In The Estate of Robert Tremaine v. Lorraine Tremaine, the Court ruled that the ex-wife of the decedent should keep the proceeds of his IRA where she was still named as beneficiary at his death. This ruling came despite an agreement in their divorce that each was to keep his own retirement funds and accounts and the other gave up all rights and interests in them.

The Court found that the agreement was ambiguous as to the death benefit. It was clear that Mr. Tremaine had the right to withdraw the funds during his life, and the right to change the beneficiary, but he failed to exercise that right. The agreement to give up rights to the IRA did not necessarily include giving up the position as beneficiary if the ex-spouse did not make any changes.

This shows that it is very important to review all assets and complete new beneficiary designation forms so that your assets will pass as you want. You should not rely on outside agreements or court decrees to make those changes.

Another issue that bears further discussion is the effect of getting married on Estate and Benefits planning. A spouse has certain rights in marital assets including a general claim against the estate of a deceased spouse, even if not named in the Will. New estate planning documents should be completed if you get married.

For Medicaid purposes, all of the assets of the couple are counted in making a determination of eligibility for benefits, regardless of the origin of the assets. Pre-nuptial agreements cannot change this rule no matter what they say, because the Federal law of Medicaid and public policy overrule the agreement. This means that a well-off person who marries a less-well-off person will be responsible for the spouse’s cost of nursing home care, no matter what.

Estate Planning should not overrule love, but the consequences of marriage and divorce must be taken into account when making your Estate Plan.