The process of getting a divorce is an overwhelming experience that causes an impact in almost aspect of your life, right down to your plan for your estate. 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.
There can be a number of tragic consequences to not properly updating your plan, some of which you hadn’t even thought of, and you cannot rely on your divorce lawyer to know about and/or bring them up. So if you are considering or in the middle of a divorce, here are some things to keep in mind.
First, update the plans for your estate as soon as you know that the split is inevitable. Don’t wait for the divorce to be final, and here’s why: until your divorce is final, your marriage is legally in full effect. Spelled out, this means that if you die or become incapacitated while your divorce is ongoing and haven’t updated the plans for your estate, your soon-to-be ex-spouse could end up with complete control over your life and assets.
Given that you’re ending the relationship, you probably wouldn’t want your to-be-ex having that much power over you. If that’s the case, you must take action, because while state laws can limit your ability to make certain changes to your plan once your divorce has been filed. Here are a few of the most important updates you should consider making as soon as you spot divorce on the horizon.
1. Update your power of attorney documents
Without updating your power of attorney, if you were to become incapacitated for any reason during the divorce, the very person you are spending big money to remove from your life would be granted complete authority over all of your legal, financial, and medical decisions. With this, you can see why updating your power of attorney is crucial as soon as you know the divorce is coming.
Your plan should include both a durable financial power of attorney and a medical power of attorney. The first 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. The latter 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. Furthermore, most people typically name their spouse as their decision maker in these documents, so it’s critical to take action even before you begin the divorce process and grant this authority to someone else. You should be especially concerned about this if things are anything less than amicable between the two of you.
We recommend you don’t rely on your divorce lawyer to update these documents for you, unless they is an expert in planning estates, 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. So don’t wait–immediately contact us, as your Personal Family Lawyer®, to support you in getting these documents updated.
2. Update your beneficiary designations
Next, you should update beneficiary designations for assets that do not pass through a will or trust, such as bank accounts, life insurance policies, and retirement plans because 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. Also keep in mind that due to restrictions on changing beneficiary designations after a divorce is filed, the timing of your beneficiary change is particularly critical.
It’s best to get these changes complete as quickly as possible since 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. Thus, 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. If naming new beneficiaries is not an option for you now, once the divorce is finalized it should be your number-one priority.
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 Levi Alexander, Personal Family Lawyer®. 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 calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.