What You Should Know About Divorce and Estate Planning

What You Should Know About Divorce and Estate Planning
Going through a divorce is very traumatic. There can be hard feelings. There are dozens of difficult decisions to be made and papers to be signed. It creates a serious disruption of your life and it may take you time to recover. During this stressful time some things may be overlooked. You must not overlook your estate plan.

Your estate plan is designed to allow you to maintain control over what happens to you, your loved ones, and your assets in the event of disability and after your death. If you do not update your plan during, or soon after, your divorce, you may no longer be in control. Your original plan was created under a specific set of circumstances that have changed. Maintenance and updating of your plan is necessary and critical to providing for your loved ones and ensuring that you do not leave them a big mess.

Whether you realize it or not, you have an estate plan, or at least some parts of a plan. Included in your estate plan may be the well known estate planning tools - the will (it may be the State’s will if you have not executed one) and durable powers of attorney. You must also consider your life insurance policies and retirement accounts.

Should I Do Anything Before the Dissolution Is Final?

If you die before the divorce is final and you do not have a formal estate plan, your spouse is entitled to part of your property. Life insurance policies and retirement accounts are controlled by beneficiary designations, and if you are like most people, your spouse is probably named as the primary beneficiary.

If you have a formal plan in place (Will, Trust, Durable Powers of Attorney) the plan will control. But, you have most likely named your spouse as your primary beneficiary, trustee, personal representative, financial agent, and health care agent.

If you no longer want your spouse to share in your estate, you will either need to amend your estate plan or create a formal plan. You should also change the beneficiary designations for your retirement accounts and life insurance policies. You will need your spouse’s consent if you do not name your spouse as the primary beneficiary for your retirement accounts.

I Didn’t Do Anything Before the Divorce Was Final - What Do I Need To Do Now?

MINOR CHILDREN AND GUARDIANSHIP

If you do not have a trust and you have young children, now may be the right to time create one. If something should happen to you, either disability or death, your former spouse will have full custody of the children. If you leave assets to your children and they are minors you create two problems.

First, someone will need to petition the court to become guardian of the estate to control the assets. Second, that someone is likely to be your former spouse. By leaving your assets in a trust for your children you control who manages the money and the need for a guardianship is eliminated.

WILLS AND DURABLE POWERS OF ATTORNEY

To avoid these problems you should have your Will, Financial Durable Power of Attorney and Advance Healthcare Directive redrafted. In addition, your goals may have changed for your estate plan due to the divorce. These changes should be reflected in a new plan.

TRUSTS AND OTHER ESTATE PLAN MATTERS

You also need to review other parts of your estate plan. Beneficiary designations for your retirement accounts and life insurance policies remain in effect until you change them. Unfortunately, there are many cases out there where someone has gone through a divorce and forgotten about their estate plan. We have numerous cases where an ex-spouse remains the beneficiary of a life insurance policy. Because life insurance is a contract, the former spouse as primary beneficiary stands and the other beneficiaries are left out! The same is true of retirement accounts. The beneficiary designation controls. You must immediately change the beneficiaries of your life insurance and retirement accounts.

If you have a trust, the trust remains in effect, and if it is a joint trust, your former spouse remains as a trustee of the trust. Even if your trust provides language dealing with divorce, you should consider revoking the trust and creating a new trust tailored to your new situation and goals. You may also want to consider restating the current trust in its entirety.

Lena Barnett & Associates, L.L.C.

Our firm designs estate plans that work. We offer client centered counseling to develop a plan custom-designed for you. Our initial meeting is used to learn about you, your family, your estate and, most importantly, your goals.

It is our goal to provide you with a plan that works for you. Plans that work allow you to control your property while you are alive and well, take care of yourself and your loved ones in the event of disability, and upon your death allow you to give what you have - to whom you want, when you want, the way you want, and all at greatly reduced financial and emotional cost to you and your loved ones.

This information was prepared by Lena Barnett & Associates, LLC and is intended only to provide general information. It is neither offered nor intended for use as legal advice, nor is it a substitute for a consultation with an attorney.

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