Going through divorce can be an overwhelming experience that impacts nearly every facet of your life, including estate planning. With so much to deal with during the divorce process, many people forget to update their plan or put it off until it is too late.
Failing to update your plan for divorce can have a number of potentially tragic consequences, some of which you have likely not considered. In most cases, you cannot rely on your divorce lawyer to bring those issues up. If you are in the midst of a divorce there are several things that you need to know. First, you want to update your estate plan as soon as you know a split is inevitable.
Here is why: until your divorce is final, your marriage is legally in full effect. This means if you die or become incapacitated while your divorce is ongoing without updating your estate plan, your soon-to-be ex-spouse could end up with complete control over your life and assets.
Given that you are in the process of ending the relationship, you probably would not want him or her having that much power. 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 divorce is on the horizon.
1. Update your power of attorney documents
If you were to become incapacitated by illness or injury during your divorce, the very person you are paying big money to legally remove from your life would be granted complete authority over all of your legal, financial, and medical decisions. It is vital that you 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. Most people typically name their spouse as their decision maker in these documents, so it is critical to take action—even before you begin the divorce process.
Once divorce is a sure thing, immediately contact us as your Life & Legacy Attorney, to support you in getting these documents updated. We do not recommend you relying on your divorce lawyer to update these documents for you, unless he or she is an expert in estate planning. There can be many details in these documents that may be overlooked by a lawyer using a standard form rather than the documents we will prepare for you.
2. 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 have not changed the beneficiary of your IRA to name your new spouse, the ex you divorced 15 years ago could end up with your retirement account upon your death. 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. If you are anticipating a divorce, you may want to consider changing your beneficiaries prior to filing divorce papers. 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 us and your divorce lawyer to see if changing beneficiaries is legal in your state—and whether it is in your best interest. Finally, if naming new beneficiaries is not an option for you now, once the divorce is finalized it should be your number-one priority. In fact, put it on your to-do list right now!
Next week, we will continue with part two in this series on the estate-planning updates you should make when getting divorced.
This article is a service of Reflections Life Planning LLC, Personal Family Lawyer®. 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 calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.