Major life changes such as marriage, having children, moving out of state, and divorce are all cause for revisiting your estate plan. Estate plans are put in place to protect important assets and loved ones. A considerable change, such as a divorce, affects not only your assets but yourself and your children.
If you already have an estate plan, making changes after a divorce is crucial to ensure your plan functions appropriately. If you are dealing with a divorce and do not have an estate plan, it is vital that you put agreements into effect to protect yourself, your loved ones, and your financial future.
Here are a few simple steps to help you prepare for and modify your estate plan after a divorce.
After your divorce is final, give your divorce agreement to your estate planning attorney. Your attorney needs to know what personal and financial obligations you have to your ex-spouse.
Update your health power of attorney. Your health care power of attorney allows you to decide who can make health care decisions for you if you become ill or incapacitated. Without updates, your ex-spouse may be the one making these decisions. It is important to name someone you trust.
Change your financial power of attorney. Your power of attorney has decision-making power over your finances and assets after death. In many cases, this person will be your ex-spouse. You may want to update your power of attorney to a trusted friend or family member.
Revise your will and trust. Many couples have a commingled will naming each other as primary beneficiaries. You may want to edit or remove the provisions naming your ex-spouse as executor or trustee. A valid will with a newer date supersedes previous documents. You may also need to amend your trust. It is best to discuss will and trust changes with your estate planning attorney.
Determine guardianship for minor children. Depending on the relationship between children and parents, ex-spouses may not always be the best choice for guardianship. For instance, if there is a substance abuse issue with you ex-spouse, you may want to designate a family member or trusted friend as guardian for your children.
Create a trust for minor children. Without a trust for minor children your ex-spouse has control of the children’s finances until they reach the age of 18. A revocable trust names someone of your choosing as trustee to access and control your children’s assets if you die.
Update Life Insurance Policies. Life insurance policies are payable on death. If you own a life insurance policy on yourself and your spouse is the beneficiary, you may want to change the designation. Contact your insurance agent to obtain a change-of-beneficiary document.
Update beneficiary designations. Retirement plans, 401Ks, IRAs, and savings accounts, investments, and other payable-on-death accounts need to be updated after a divorce. Many of these accounts allow you to bypass a formal probate process and assign beneficiaries directly to the account. As long as you are the sole account holder you should be able to update these designations on your own.
Think about a prenuptial agreement. If you are contemplating getting remarried, consider a prenuptial agreement to avoid any legal or financial complications in the future.
Dealing with a divorce can be an overwhelming and emotional time. Taking the proper actions regarding your estate plan before and during your divorce can provide financial protection for yourself and your heirs while eliminating unnecessary complications.
Contact your estate planning attorney if you have any questions regarding your estate plan before, during, or after a divorce.
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