A divorce can have many consequences and set you back with emotional turmoil for a period of time. It’s also time for some reflection on how to move forward in the most positive light possible. Many actually view it as wiping the slate clean (I did). One of the most important personal matters that shouldn’t be overlooked or avoided for very long after a divorce is updating your will, powers of attorney, and other estate planning devices. Hopefully, you’ll have had the assistance of a good divorce attorney to help advise you on the matters of dividing your assets, so that you are not taken to the cleaners.
At the very least, your estate plan sits untouched and becomes increasingly outdated over time. At the very worst, you could die accidentally without having ever updated your estate plan. There’s several reasons why this could be a grave error. Firstly, your estate plan would reflect your prior marriage status, and in effect probably put your ex-spouse as the beneficiary of most of your worldly possessions. So, even though you are going through difficult times, this is one personal business matter that cannot be put off. Let’s look at what you should change and why.
Revoke Your Old Will
Turning a new leaf or creating a new chapter in your life after a divorce should include shredding your old will, or burn it if you like. Then immediately proceed to make a new one. A will can be done relatively inexpensive using online software, like LegalZoom’s online tool. But, to ensure that you don’t make some kind of trivial mistake that could have larger repercussion, it’s always best to err on the side of caution, and use a family law attorney to properly draft your will.
Again, the reasons for remaking a will or creating a new one is so you can:
- Name benefactors for your assets, such as a home, bank accounts, investments, etc. If you have a house for instance, you will want to name a benefactor for it. Some states, however, will nullify any bequests to ex-spouses after a divorce. But, it’s never a good practice to rely on state laws, because they change over time.
- Designate an executor of your estate as well as a medical power of attorney. In most marriages, spouses will name their partner as their estate executor. In some states, a divorce will revoke that authority from an ex-spouse and hand over the reins to an alternate executor. However, if an alternate executor isn’t name, the courts will appoint one for you. Never count on state law, so it’s best to make a new will and appoint a new estate executor.
- If you have children, you can specify a guardian in the event both parents are deceased. But, if you unexpectedly die, it’s unlikely you can do anything about your ex-spouse being a guarding. However, you can take action with regard to any money you plan to leave them. In this case, you’d probably want to draw up a trust for them. If something should befall both parents, you can name an alternate guardian to raise your children.
Other Estate Matters to Update
A lot of important estate documents exist outside of your will, and those will likewise need to be addressed and updated following a divorce. Again, the main reason to revisit these documents is so that you can update the beneficiary designation.
- Life Insurance – If you should die before getting this document updated, the life insurance company is bound by law to pay out proceeds to the named beneficiary on the policy contract, and it may very well be your ex-spouse. One strategy your attorney can help with is setting it up so that the proceeds from your life insurance would go directly to a trust immediately upon your death for the benefit of your children or another designated beneficiary.
- Pensions/Retirements Plans/401(k)s/IRAs – Never assume that a state will make the intended correction for payment to a beneficiary. Just like life insurance, most of these documents are legal and binding, so they’ll require a change in beneficiary, if you named your ex-spouse as the primary beneficiary.
- Trusts/Payable-On-Death (POD) Brokerage Accounts – These are very important estate planning tools, which will also need attention as far as naming a suitable beneficiary in order to prevent an unwanted ex-spouse from receiving the assets. Changing the beneficiaries for these tools will require going to your bank, brokerage firm, or employer, and requesting new documents. You’ll want to submit these in a very fast manner, as it could take time to process them.
- Revocable Trust – If you have one of these, it’s vital to update the document to ensure there are no situations where your ex-spouse is a beneficiary or trustee. Trusts that are irrevocable cannot be altered, so if you’re ex-spouse is listed as a beneficiary, they’ll received proceeds from that trust. If the trust is set up for your kids, all you may need to do is review it or ensure that proceeds are set up to transfer to it.
Obviously, after a divorce there are a lot of matters that will need to be attended to, but revisiting your estate plan should be right there at the top of the list.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.