Getting Divorced? Don’t Overlook These 4 Updates to Your Estate Plan—Part 1
Getting
Divorced? Don’t Overlook These 4 Updates to Your Estate Plan—Part 1
by Amy Clemmons Brown, Esq.
Going through 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 or put it off until it’s too late.
Failing to update your plan for divorce can have a number of 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. 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 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 having 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 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. Given this, it’s 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. And since most people typically 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, especially if things are anything less than amicable between the
two of you.
Once divorce is a sure thing, don’t wait—immediately contact us, as your
Personal Family Lawyer®, 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 he or she is an expert
in estate planning, as 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.
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 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 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 your divorce is already filed, consult with us and your divorce lawyer to
see if changing beneficiaries is legal in your state—and also whether it’s 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’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 Amy Clemmons Brown, Esq., Personal Family Lawyer®. I don’t just draft documents; I ensure you
make informed and empowered decisions about life and death, for yourself and
the people you love. That's why I offer a Family Wealth Planning Session™,
during which 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 my office today at 501-376-9119 to schedule a Family Wealth Planning Session and
mention this article to find out how to get this $750 session at no charge.
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