Don’t Forget to Revise Your Estate Plan After a Divorce

//Don’t Forget to Revise Your Estate Plan After a Divorce

Tom sat staring at the phone. He hated lawyers. Ever since his divorce, he learned to hate all things legal. Well, except for his own attorney. She had done the best she could to protect him in the divorce proceedings, and the outcome wasn’t miserable. But still, considering his ex was the one who cheated on him, he thought he should have been entitled to keep more. And his ex’s attorney was absolutely horrible. Thankfully, he still had joint custody over his two children and got to see them almost half the time every week. Even if he did have to deal with his ex living with the man she cheated on him with whenever he picked the kids up and there was nothing his attorney could do about that. So, still, he hated attorneys.

His parents had actually been hounding him to go to their attorney to get his estate planning done ever since the divorce. But now, like a slap in the face, he saw why it was so important. His cousin Barry (a third or fourth cousin, he wasn’t sure which it was) had also gone through a messy divorce and hadn’t updated his estate plan. And about a month and a half ago Barry was hit and killed by a drunk driver while crossing the street.

“Well, Winona was still listed as getting everything in Barry’s Will!” his mom had told him a few minutes ago. “Well, thankfully I talked with aunt Marge and she got me a copy of Barry’s Will, and so I called our attorney to see if he could help, but he couldn’t because Barry lived in another state so he gave us a referral. But he did say that it was very likely that Winona wouldn’t get anything, but what he was concerned about is that Barry’s son Tyler who is eight will likely have his inheritance turned over to Winona to take care of until Tyler is twenty-one. Can you believe that?”

Even though Tom’s mother talked a mile a minute, hearing that made time seem to stop, and he got a chill up his spine. The last thing Tom would ever want is for his ex, and he live-in boyfriend, to get control of his children’s money.

Tom picked up the phone and dialed the attorney’s number.

Getting a divorce is a big life change, whether it’s messy or simple. While people often spend most of their time thinking about the obvious details, such as who gets the house, the television, the car and the pets—many individuals neglect the long-term changes that accompany a divorce. If you’re recently divorced, or in the middle of a divorce, don’t forget to revise your estate plan to reflect your change in circumstances.

Update Wills and Trusts
After a divorce, you’ll probably want to change your wills and trusts to reflect your change in situation. Remove your spouse as a beneficiary, or you may inadvertently leave a portion of your assets to him or her. Alternately, if you don’t currently have a will or trust established to provide for family or children after your death, now is the time to do it—otherwise, some assets may revert to your ex-spouse after death.

If you have children and your former spouse is raising them, you may want to leave your children as a beneficiary but change the terms to provide directly for the children rather than through the ex. If the kids are old enough, list them as the first-level beneficiaries in your legal documents—and if not, then consider appointing a trustee or someone with legal authority to manage financial assets on behalf of your kids until they reach an appropriate age, possibly thirty (30) or later.

Consider Revising Executors and Trustees
When you’re married, you often name family members or friends as potential executors of the will, or trustees if you’re leaving a trust to provide for the spouse and the children. When you get divorced, those trustees and executors may no longer respect your wishes. If you’ve named an executor or trustee who may be biased in favor of your former spouse—particularly if it’s an acrimonious divorce—you’ll want to revisit those appointments and name new individuals who will dispose of your assets the way you want.

Nominate Guardians to Care for Your Children
If you’ve gotten even partial custody of the children in the divorce—what happens if you become disabled, or an accident or illness results in your untimely death? In many cases, custody would revert back to the spouse—and sometimes that’s ok. But if you don’t feel that your former spouse is capable of caring for the children—maybe because of a drug or alcohol addiction or other serious issues that could adversely impact your kids—make sure you nominate guardians to care for your children. This can be particularly tricky from a legal standpoint if your ex has any interest in custody, so make sure you consult with an experienced attorney regarding nominating a guardian after your divorce.

Check State Law Regarding Revocation of Bequests
Some states have laws that revoke inheritances to a spouse or relatives of the spouse after a divorce. Find out if your state automatically revokes inheritances to the spouse or the spouse’s family. This can have long-term implications for:

• Revocable living trusts
• Retirement plan beneficiary designations
• Pay-on-death accounts
• Life insurance policy beneficiary designations

It can also have tax implications. Whether or not you live in a state that automatically revokes bequests after a divorce, it’s a good idea to consult with an estate attorney to discuss your options, legal implications, and tax liability as a result of this issue.

Make New Powers of Attorney
If you have any form of power of attorney that gives your spouse legal authority to make decisions on your behalf, now is the time to revise those documents to reflect the change in your status. This includes:

• Health Care Power of Attorney
• Financial Power of Attorney
• Specific limited powers of attorney (for transactions related to specific accounts)

Basically, if there’s any type of document or account instructions granting your former spouse the ability to act on your behalf, now is the time to revisit these items.

Change the Beneficiary on Insurance and Investment Accounts
While you were married, you likely listed your spouse as a beneficiary for any number of insurance policies, investment accounts and other financial assets. After your divorce, don’t forget to remove your spouse from these policies! Revisit:

• Bank and savings accounts
• Retirement, 401(k), IRA and other investment accounts
• Pay-on-death accounts
• Life insurance
• Homeowners’ insurance
• Car insurance
• Transfer-on-death brokerage accounts

Eliminating your former spouse from your estate plan after your divorce can quickly become a complex process. Working with an experienced estate planning attorney ensures that you’ve revised your plans and documents sufficiently, and that every aspect of the plan pertaining to your ex has been properly resolved.

By | 2017-05-20T16:43:19+00:00 September 28th, 2016|Company News|0 Comments