Estate Planning After Divorce: What You Need to Know

Estate Planning After Divorce: What You Need to Know

Divorce is often one of the most difficult events married couples may ever have to deal with. Whether there are children or not, legally ending a union that started off on one of the happiest days is traumatic.

The reasons for divorce are many. While some divorces happen decades into the marriage, other marriages barely get off the ground before they split apart. But there is one important task that many people tend to let fall through the cracks that can be even more traumatizing. And this is not something that is likely to be brought up by your divorce lawyer. What I’m referring to is the failure to update your estate plan. In fact, if you know divorce is inevitable, you can update your estate plan before papers are filed. And, if not prior to the finalization of the divorce, then take action to update it as soon as it becomes final.

Why Updating Your Estate Plan Is So Important Upon Divorce

Up until a divorce is final, the marriage is legally in full effect. This means if you die or become incapacitated while your divorce is ongoing and haven’t updated your estate plan, your soon-to-be ex-spouse could end up with control over your assets. Given that the relationship is ending, you probably wouldn’t want your ex to possess that much power.  If you have an estate plan, it’s imperative to take action and update it immediately. While some 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
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 an individual of your choice the legal authority to make your healthcare decisions in the event of your incapacity.

Once again, if you were to become incapacitated by illness or injury during your divorce, since many persons typically name only their spouse as their decision maker in these documents, your spouse would be granted authority over of your legal, financial, and medical decisions. Or even worse, there could be deemed no one appointed to advocate for you and your assets if the spouse is denied the ability to serve as your agent under the power of attorney documents. Given this, it’s vital that you update your power of attorney documents as soon as you know divorce is coming.

Once divorce is a sure thing, don’t wait—immediately contact your Estate Planning Attorney to get these documents updated.

2. Update your beneficiary designations
In addition to your financial and healthcare Power of Attorney, as soon as you know you are getting divorced, update beneficiary designations for assets that do not pass through a will or trust. This includes the beneficiaries on bank accounts, life insurance policies, and retirement plans. Failing to change your beneficiaries can cause serious trouble down the road.

Numerous horror stories can be told when people fail to tend to updating beneficiaries. For instance, this is an example that happens more often than you’d imagine. 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 however many 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 an individual 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’re anticipating a divorce, you may want to consider changing your beneficiaries prior to filing divorce papers, and then post-divorce you can always change them again to match whatever is determined in the divorce settlement.

If you are considering filing for divorce or suspect that your spouse is going to file, and you have an estate plan that you want to update, give my office a call at (470) 235-7868. Let us help you make a difficult situation at least a little less stressful.

Posted Under: Shannon Pawley