Estate Planning During Divorce: Lessons from Shannen Doherty’s Legacy

The passing of actress Shannen Doherty in July 2024 highlights the importance of estate planning during divorce. Known for her roles in?Beverly Hills, 90210,?Heathers, and?Charmed, Doherty not only faced a public battle with cancer but also took crucial steps to finalize her divorce and secure her estate. Her story underscores why proper timing and planning are essential when navigating one of life’s most challenging transitions.

The Importance of Timing

Just one day before her passing, Doherty filed for an uncontested divorce from her husband, Kurt Iswarienko, who signed the agreement the next day. This last-minute decision significantly impacted her estate, ensuring her assets – such as her $6 million Malibu home and future acting residuals – were distributed according to her wishes rather than community property laws.

Had the divorce not been finalized, the legal outcome could have been very different. In some states, if a person dies while a divorce is still pending, the process is either paused or dramatically altered. In California, a community property state, Iswarienko may have had a legal claim to a substantial portion of Doherty’s estate, potentially leading to lengthy legal disputes.

Common Estate Planning Mistakes During Divorce

While Doherty acted just in time, many individuals make estate planning mistakes during divorce that can create lasting issues for their families. Here are some of the most common pitfalls to avoid:

1. Failing to Update Beneficiary Designations

Many people assume that a divorce automatically removes their ex-spouse as a beneficiary on accounts and insurance policies, but this isn’t always the case. Some states revoke ex-spouse beneficiary designations upon divorce, while others do not. Additionally, federal laws can override state laws for certain accounts, such as employer-sponsored retirement plans. Without updating your beneficiaries, your ex-spouse could still inherit assets like your 401(k) or life insurance proceeds, even after your divorce is finalized.

2. Overlooking Digital Assets

In today’s digital world, your online accounts and assets should not be forgotten. This includes cryptocurrency, streaming services, airline miles, digital photos, and social media accounts. Failing to update passwords or designate who should inherit these assets could leave loved ones locked out of valuable accounts and important memories.

3. Forgetting Incapacity Planning

Divorce affects more than just your estate after death – it also impacts who can make decisions on your behalf if you become incapacitated. If your ex-spouse was previously named as your healthcare proxy or had power of attorney over your finances, you need to update these documents immediately. Without doing so, they may still have legal authority over your medical and financial decisions, which may not align with your current wishes.

4. Making Emotional Decisions

Divorce can be emotionally overwhelming, leading to rushed decisions that may have unintended legal consequences. It’s important to think long-term and avoid estate planning choices driven by frustration or hurt feelings. Working with an experienced estate planning attorney can help you make level-headed, strategic decisions that align with your values and protect your loved ones.

How to Protect Your Assets During Divorce

To ensure your assets are properly protected during divorce, follow these three key steps:

Step 1: Create an Inventory of Your Assets

Make a comprehensive list of all your assets, including real estate, bank accounts, investments, retirement funds, life insurance policies, and digital assets. This will help ensure nothing is overlooked during the divorce process.

Step 2: Review and Update Beneficiary Designations

Carefully review the beneficiary designations on your financial accounts, retirement plans, and insurance policies. Keep in mind that these designations typically override what’s written in a will or trust, so updating them is crucial.

Step 3: Create a Comprehensive Estate Plan

A well-crafted?Life & Legacy Plan?ensures your assets go to the right people, in the right way, and that you have trusted individuals making decisions on your behalf if needed. It also helps ensure your plan is regularly updated as life changes.

Your Next Step

At Cheever Law, APC, we don’t just draft documents; we ensure you make informed and empowered decisions about life and death for yourself and the people you love, starting with a valuable and educational Life & Legacy Planning Session. This will allow you to get more financially organized and make the best choices for the people you love. If you have already completed your estate plan, we will review that plan at your Life & Legacy Planning Session to ensure that it will work the way you intend and address any holes or gaps that may be present if circumstances have changed since you executed your plan.

To learn more about our one-of-a-kind systems and services,?contact us?or?schedule a no-obligation 15-minute introductory phone call?today.