The passing of cherished Gen X actress Shannen Doherty in July 2024 provides valuable insights into estate planning amidst divorce. Renowned for her memorable roles in "Beverly Hills, 90210," “Heathers,” and "Charmed," Doherty bravely confronted a public battle with breast cancer while also working swiftly to finalize her divorce and safeguard her estate. Her experience highlights the importance of timely and strategic planning during divorce, one of life's most difficult transitions.
The Power of Timing
As reported, just one day prior to her passing, Doherty initiated an uncontested divorce from her husband Kurt Iswarienko, who signed the agreement the next day. This last-minute timing was vital for her estate. By completing the divorce, Doherty guaranteed that her assets — including a $6 million Malibu home and future earnings from her acting career — would be allocated according to her wishes instead of being governed by community property laws.
Had the divorce not been finalized, the outcome could have been drastically different. In some states, if a person dies during an active divorce proceeding, the process either halts or is significantly altered. Without a finalized divorce agreement in a community property state like California, Iswarienko could have had a legitimate claim to significant portions of Doherty's estate, potentially leading to years of costly legal battles and family conflict.
Common Estate Planning Mistakes During Divorce
While Doherty managed to finalize her divorce just in time, many people make critical estate planning mistakes during divorce that can have lasting consequences for their families.
Here are the most common pitfalls to avoid:
Delaying Updates to Beneficiary Designations. A common error is believing that a divorce automatically removes your ex-spouse as a beneficiary from your accounts and insurance policies. The situation is more complex. Some states have laws that automatically revoke ex-spouse beneficiary designations upon divorce, while others do not. Additionally, federal law may take precedence over state law for certain accounts, such as employer-sponsored retirement plans. This means your ex-spouse might still receive your 401(k) or life insurance benefits post-divorce if you don't actively update your beneficiaries. When you collaborate with me to develop your Life & Legacy Plan, I assist you in ensuring your assets are distributed to your chosen individuals in the desired manner. This includes updating your beneficiary designations if necessary.
Neglecting Digital Assets. In the modern digital age, it's crucial to consider your online presence and digital assets during a divorce. Accounts for streaming services, airline miles, cryptocurrency, digital photos, and social media need to be addressed. Many individuals overlook updating passwords and access details or neglect to designate who should inherit these digital assets. This oversight can prevent your loved ones from accessing important memories, valuable assets, or essential account information.
Overlooking Incapacity Planning. Divorce typically shifts focus to post-mortem arrangements, yet planning for incapacity is just as crucial. Your ex-spouse might have been your healthcare proxy or held power of attorney over your finances. Throughout and following the divorce process, it's essential to appoint new agents to handle medical and financial decisions should you become incapacitated. Without revised incapacity planning documents, your ex-spouse may still possess the legal authority to make vital decisions regarding your care, which you might prefer to avoid.
Making Emotional Decisions. Divorce is emotionally charged, and many people make hasty decisions based on anger or hurt. For example, you might make choices that could trigger expensive legal battles after your death. When you work with me, I am your trusted advisor who can help you see the impact of your decisions and support you to create a Life & Legacy Plan that aligns with your long-term goals and values.
Protecting Your Assets During Divorce
To avoid these common mistakes and protect your assets during divorce, consider these three practical steps:
Step 1: Create an Asset Inventory
Document all your assets, including property, bank accounts, retirement accounts, investments, life insurance policies, and digital assets. Note which assets are yours alone and which ones are joint assets. This inventory will help ensure nothing is overlooked during the divorce process. When you meet with me for a Life & Legacy Planning Session, I will support you with this step.
Step 2: Review and Change Beneficiary Designations
Systematically review and update beneficiary designations on all financial accounts, retirement plans, and insurance policies. Remember that beneficiary designations typically override what's written in your will or trust.
Step 3: Create a Life & Legacy Plan
When you work with me to create your comprehensive Life & Legacy Plan, you’ll know your assets will go to the people you want in the way you want and that you’ll be cared for by those you trust most if you become unable to care for yourself. You’ll also know that your beneficiary designations will be updated, your assets accounted for, and that you’re making the best decisions for the long term.
Your Next Step
I can help you navigate life's transitions while protecting your assets and loved ones. I don't just create estate planning documents — I provide ongoing support to ensure your plan evolves with your life changes and works when you and your loved ones need it most.
Through the Life & Legacy Planning process, I will help you make informed decisions about your estate, especially during major life transitions.
This article is a service of the Law Office of Keoni Souza, an estate planning law firm in Honolulu, Hawai`i. 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. That is why we offer a Family Wealth Planning Session, during which you will get more financially organized than you have ever been before and make all the best choices for the people you love. You can begin by contacting our office today to schedule a planning session and mention this article to find out how to get this $750 session at no charge.
Disclaimer: All information on this website is for informational purposes only and is not legal advice. You should contact an attorney trained to work with families on estate planning matters regarding your specific situation. Use of and access to this website or any of the email links contained within the site do not create an attorney-client relationship between the Law Office of Keoni Souza, LLC, and any users or any other party.
