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. If you are in the midst of a divorce, there are several things you need to consider. 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 to have 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 at Truestlaw.com to support you in getting these documents updated.
2. Update your beneficiary designations
As soon as legally permitted by law in your state, 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, you could end up creating litigation and possibly even the wrong person could end up with your 401(k), depending on what state you live in.
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 consult with your divorce attorney about whether changing your beneficiaries prior to filing divorce papers is appropriate. 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!
This article is a service of Truest Law. 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’s why we 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 visiting our website at Truestlaw or by calling our office at 480-949-6500 and mention this article to find out how to get this $750 session at no charge.