16 Nov How to Adjust Your Estate Plan After Divorce
The divorce process does not end when the papers are signed. Once both parties have legally gone their separate ways, important documentation will need to be changed to reflect the new relationship status. Start by updating your estate plan, as not doing so could result in your ex-spouse inheriting your assets. Here is how you should update your estate plan following a divorce.
Revoke Old Documents
If you made a will with your spouse named as a fiduciary (ie executor) or beneficiary, it is necessary to revoke the old will and create a new one with an estate planning attorney. This is imperative to ensure your ex-spouse does not inherit any assets when you die or is given authority to administer your estate. A will includes names of people you wish to receive your property, an executor for your estate and a guardian(s) for minor children and their property.
As with a will, it is best to amend your living trust to remove your spouse as trustee and update the distribution provisions.
Some state laws dictate that any gifts to an ex-spouse in a will or living trust created prior to the divorce are automatically revoked upon divorce. Regardless, it is best to create a new will and living trust that is aligned with your wishes.
Assign Powers of Attorney
A power of attorney is legal document that allows someone to act on your behalf if you are unable to due to incapacity. If your ex-spouse has power of attorney regarding your medical and financial affairs, it is advisable that you revoke those powers of attorney and ensure that all copies are collected and destroyed. You can then establish a new power of attorney by appointing a trusted individual (e.g. relative, adult child) as your agent.
Update Beneficiary Designations
If your ex-spouse is named as your beneficiary on any asset accounts containing a beneficiary designation, it is vitally important that those designations are updated as there are no default state laws that would invalidate those designations by virtue of the divorce. Some beneficiary designation accounts include: life insurance policies, retirement accounts (e.g. IRAs, 401(k)s or pensions) and brokerage accounts. In order to make the necessary changes to your beneficiary designations, you will need to obtain necessary forms from your financial institutions.
If you want to protect yourself and your family after filing for and obtaining a divorce, it is critical to revise your estate plan with an experienced attorney. While emotions tend to run high throughout divorce proceedings, knowing your estate and finances are in order can put your mind at ease.
If you are a business owner, learn about how to protect the value of your business with an estate plan.