The passing of beloved Gen X actress Shannen Doherty in July 2024 offers key lessons about estate planning amidst divorce. Best known for her roles in Beverly Hills, 90210, Heathers, and Charmed, Doherty bravely fought a public battle with breast cancer while simultaneously working to finalize her divorce and secure her estate. Her situation underscores the importance of timing and strategic planning when going through one of life’s most challenging transitions.
The Importance of Timing
Reports indicate that just a day before her passing, Doherty filed for an uncontested divorce from her husband, Kurt Iswarienko, who signed the agreement the following day. This last-minute action was a critical step in protecting her estate. By ensuring the divorce was finalized, Doherty guaranteed that her assets—including her $6 million Malibu home and future residuals from her acting career—would be distributed according to her wishes rather than falling under community property laws.
If the divorce had remained unresolved, the legal outcome could have been vastly different. In some states, an active divorce proceeding at the time of death may either stall or dramatically alter the process. In California, a community property state, Iswarienko could have had a substantial claim to a significant portion of Doherty’s estate, potentially leading to prolonged legal disputes and family conflict.
Avoiding Estate Planning Pitfalls During Divorce
While Doherty managed to complete her divorce just in time, many individuals unknowingly make critical estate planning mistakes during divorce that can create lasting complications for their loved ones. Here are some common missteps to avoid:
1. Delaying Updates to Beneficiary Designations
One of the most overlooked aspects of estate planning during divorce is failing to update beneficiary designations. Many assume that once they divorce, their ex-spouse is automatically removed as a beneficiary from accounts like life insurance policies, retirement plans, and investment accounts. However, laws vary by state, and in some cases, federal regulations may override state statutes. For example, employer-sponsored retirement plans follow federal law, which means your ex could still inherit your 401(k) unless you proactively change your beneficiary designations.
As part of my Life & Legacy Planning process, I ensure your assets are directed to the people you choose, which includes reviewing and updating your beneficiary designations to reflect your current wishes.
2. Overlooking Digital Assets
In today’s digital age, estate planning isn’t just about physical and financial assets—it extends to digital assets as well. Streaming service subscriptions, airline miles, cryptocurrency holdings, digital photos, and social media accounts all need attention during divorce. Many individuals forget to update passwords and access information or fail to designate who should inherit these assets, leaving their loved ones locked out of valuable or sentimental accounts.
3. Failing to Address Incapacity Planning
Divorce shifts focus primarily to asset division, but incapacity planning is equally critical. If your ex-spouse was previously named as your healthcare proxy or had financial power of attorney, it’s essential to update these designations. Otherwise, they may still have legal authority to make medical and financial decisions on your behalf if you become incapacitated—something you may not want.
4. Making Emotionally Driven Decisions
Divorce is an emotional process, and many individuals make rash estate planning choices fueled by anger or resentment. While understandable, these hasty decisions can lead to costly legal battles for your heirs. As your estate planning attorney, I provide guidance to help you make informed, long-term choices that align with your financial and personal goals, ensuring your plan is both practical and effective.
Three Steps to Protect Your Assets During Divorce
To avoid these common pitfalls and safeguard your estate, consider these proactive steps:
Step 1: Conduct a Comprehensive Asset Inventory
List all your assets, including real estate, bank accounts, retirement funds, investment portfolios, insurance policies, and digital assets. Clearly distinguish between personal and joint assets to ensure full transparency during the divorce process. When we meet for a Life & Legacy Planning Session, I’ll guide you through this crucial step to ensure nothing is overlooked.
Step 2: Review and Update Beneficiary Designations
Go through all your financial accounts and insurance policies to confirm that your beneficiary designations align with your current wishes. Remember that these designations often take precedence over the terms in a will or trust, making it essential to update them promptly.
Step 3: Establish a Comprehensive Life & Legacy Plan
Working with me to create a Life & Legacy Plan ensures that your assets will be distributed according to your wishes and that you are cared for by those you trust in the event of incapacity. A well-structured plan provides clarity and prevents unnecessary legal disputes down the road.
Take the Next Step
As your Family’s Lawyer for Life, I am dedicated to helping you navigate life’s transitions while protecting your assets and ensuring your loved ones are cared for. My role goes beyond drafting documents—I provide continuous support to ensure your estate plan adapts to your changing circumstances and remains effective when needed most.
Through the Life & Legacy Planning process, I help you make thoughtful and informed estate planning decisions, especially during major life changes like divorce.
Click here to schedule a complimentary 15-minute consultation and start securing your future today: https://abarlaw.com/get-started/
