Getting Divorced? Don’t Overlook These 4 Updates to Your Estate Plan—Part 1
Going through a divorce can be an overwhelming experience that impacts nearly every facet of your life, including estate planning. Yet, with so much to deal with during the divorce process, many people forget to update their plan.
Failing to update your plan for divorce can have many potentially tragic consequences, some of which you’ve likely not considered. And in most cases, you can’t rely on your divorce lawyer to bring them up. If you are in the midst of a divorce, and your divorce lawyer has not brought up estate planning, there are several things you need to know. First off, you need to update your estate plan, not only after your divorce is final, but as soon as you know a split is inevitable.
Here’s why: until your divorce is final, your marriage is legally in full effect. If you die or become incapacitated while your divorce is ongoing, your soon-to-be ex-spouse could end up with complete control over your life and assets. And that’s generally not a good idea, nor what you would want.
Given that you’re ending the relationship, you probably wouldn’t want him or her to have that much power, and if that’s the case, you must take action. While state laws can limit your ability to make certain changes to your estate plan once your divorce has been filed, here are a few of the most important updates you should consider making as soon as the divorce is on the horizon.
- Update your power of attorney documents
If you were to become incapacitated by illness or injury during your divorce, the very person you are legally removing from your life could be granted complete authority over all of your legal, financial, and medical decisions. Given this, you must update your power of attorney documents as soon as you know divorce is coming.
Your estate plan should include both a durable financial power of attorney and a medical power of attorney. A durable financial power of attorney allows you to grant an individual of your choice the legal authority to make financial and legal decisions on your behalf should you become unable to make such decisions for yourself. Similarly, a medical power of attorney grants someone the legal authority to make your healthcare decisions in the event of your incapacity.
Without such planning documents in place, your spouse has priority to make financial and legal decisions for you. Because most people name their spouse as their decision-maker in these documents, it’s critical to take action — even before you begin the divorce process — and grant this authority to someone else. It is especially important if things are anything less than amicable between the two of you.
Once divorce is a sure thing, don’t wait — immediately contact us to support you in getting these documents updated. We recommend you don’t rely on your divorce lawyer to update these documents for you unless they are an expert in estate planning. There can be many details in these documents that can be overlooked by a lawyer using a standard form rather than the documents we will prepare for you.
- Update your beneficiary designations
As soon as you know you are getting divorced, update beneficiary designations for assets that do not pass through a will or trust, such as bank accounts, life insurance policies, and retirement plans. Failing to change your beneficiaries can cause serious trouble down the road.
For example, if you get remarried following your divorce but haven’t changed the beneficiary of your 401(k) plan to name your new spouse, the ex you divorced 15 years ago could end up with your retirement account upon your death. And due to restrictions on changing beneficiary designations after a divorce is filed, the timing of your beneficiary change is particularly critical.
In most states, once either spouse files divorce papers with the court, neither party can legally change their beneficiaries without the other’s permission until the divorce is final. With this in mind, if you’re anticipating a divorce, you may want to consider changing your beneficiaries before filing divorce papers. Then, post-divorce, you can always change them again to match whatever is determined in the divorce settlement.
If your divorce is already filed, consult with your divorce lawyer and us to see if changing beneficiaries is legal in your state — and whether it’s in your best interest. Finally, if naming new beneficiaries is not an option for you now, it should be your number one priority once the divorce is finalized. In fact, put it on your to-do list right now!
Next week, we’ll continue with part two in this series on the estate-planning updates you should make when getting divorced.
This article is a service of Ruberg Law PLLC. We don’t just draft documents; we ensure you make informed, empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™. During the session, you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this valuable session at no charge.