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In part 2 of our series on how divorce can affect your estate plan in Illinois, we discuss powers of attorney and beneficiary designation. For more information on how divorce affects wills and trusts check out part 1 of this series. In this article, we will answer the following questions: What is power of attorney?, How does divorce affect power of attorney In Illinois?, Do I need to update my power of attorney after a divorce?, and Do I need to update my beneficiary designations after a divorce?
In part 2 of our series on how divorce can affect your estate plan in Illinois, we discuss powers of attorney and beneficiary designation. For more information on how divorce affects wills and trusts check out part 1 of this series. In this article, we will answer the following questions:
- What is power of attorney?
- How does divorce affect power of attorney In Illinois?
- Do I need to update my power of attorney after a divorce?
- Do I need to update my beneficiary designations after a divorce?
While a good estate planning attorney will cover power of attorney during the estate planning process, it can be hard to remember what elements of your life are associated with the need for power of attorney.
What is Power Of Attorney?
In a power of attorney agreement, the “principal” gives legal authority to another person called the “attorney in fact” or “agent” to make certain decisions on the principal’s behalf. The principal would be you, the person that an estate plan is created for, and the “agent” or “attorney in fact” is another person, usually a spouse or loved one.
The decisions covered under a power of attorney can be as wide-ranging as “everything” to as specific as “what to do with this one business I own.” However, they are normally split into two basic types. A power of attorney for property and a power of attorney for health care. Put more simply: someone who makes decisions about your finances when you can’t and someone who makes decisions about your health care when you can’t. Power of attorney is useful in a number of scenarios, but it is most commonly employed as security in case you become incapacitated and are unable to make decisions on your own. Most often than not, people select their spouse as their primary power of attorney. To learn more about power of attorney in Illinois check out our article, “Illinois Power of Attorney Explained.”
How Does Divorce Affect Power Of Attorney In Illinois?
Similar to wills and trusts, under Illinois Law, a finalized divorce or legal separation will render all provisions involving or referring to your spouse invalid. Illinois law reads, “The spouse shall be deemed to have died at the time of the judgment for all purposes of the agency.”
Also similar to wills and trust, the automatic removal of your spouse’s authority only applies to your spouse, not his or her family members, friends, etc. If you listed your spouse’s sister as a secondary power of attorney that would still stand and if you didn’t fill the hole in the primary power of attorney designation, then you run the risk of the sister becoming the primary. Furthermore, the removal of your spouse only takes effect once the divorce or legal separation is finalized. You are still at risk during the divorce proceedings!
Do I Need To Update My Power of Attorney After A Divorce?
Yes, if it wasn’t clear from the previous items we discussed on estate planning and divorce in Illinois, you should update your durable power of attorney as soon as you enter into divorce proceedings and, depending on how much your financial and living situation changes, you may need to update it again after the divorce is finalized.
Do I Need to Update My Beneficiary Designations After A Divorce?
While a finalized divorce or legal separation in Illinois may automatically invalidate any provisions associated with your ex-spouse under your estate planning documents, it will not automatically extend to all other accounts and financial documents. For example, many bank accounts, retirement accounts, investment accounts, etc require the primary account holder to list a beneficiary; most individuals choose their spouse. This beneficiary designation supersedes whatever is listed in your will and can create significant legal issues when administering your estate. Assets placed in trusts are usually safe, as long as the creator of the trust correctly modified the trust after the divorce.
Bottom line, after the divorce is finalized — or during divorce proceedings to be extra safe — go through all your accounts and replace your future ex-spouse as the beneficiary. You should also go through accounts that hold non-monetary digital assets, such as social media accounts, unless you don’t care what happens to those after you die.
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