The divorce process can be long and expensive. However, the work does not end once the divorce decree is signed. To ensure that your wishes for your money, property, and estate plan are carried out in light of this major life change, there are three things you must do as soon as possible.
Change the Beneficiary Designation on Life Insurance
A life insurance policy is a contract between you and the insurance company. You designate the beneficiary (the individual(s) or entity who will receive the proceeds upon your death), and the insurance company pays them when you die. Because the beneficiary designation is a legally binding contract, the insurance company is legally bound to pay the individual listed as your beneficiary. Depending on state law and the terms of your policy, if your ex-spouse is listed as the beneficiary, the insurance company may have to pay the funds out to them even though you are divorced. However, some states have laws that automatically revoke the beneficiary designation on a life insurance policy when the divorce is finalized. Regardless of the law in your state, it is best that you update your beneficiary designations so that your wishes are clearly stated for all parties involved following your death.
Update the Beneficiary Designation on Retirement Plans
Although state law may automatically revoke a designation on a retirement plan if an ex-spouse is listed, federal law states that the last named beneficiary is entitled to the funds regardless of marital status at the time of your death. Depending on the type of retirement account you have, state law or federal law may control this. To be on the safe side and avoid a potentially long and costly battle for your family, change the beneficiary as soon as possible.
Create or Revise Your Estate Plan
If you and your former spouse had a joint trust, you will need to have your own individual trust created to hold the accounts and property that are now in your name only. In this new plan, you will name a trustee (the person in charge of managing the trust’s accounts and property) and beneficiaries (the people or charities who will receive the trust’s accounts and property). If you have minor children, you may also need to consider who is going to be the trustee in charge of managing your children’s inheritance. In many cases, you probably do not want your ex-spouse in these roles.
If you do not have any estate planning documents in place, now is the perfect time to get everything in order. After going through a divorce, you probably have a good idea of what you own and the value of your accounts and property. This will be very helpful as we discuss the right estate plan for you.
Your estate plan is more than just a trust. It can include tools such as a financial power of attorney and healthcare power of attorney. If you already have these documents, now is a crucial time to review them. Chances are you no longer want your ex-spouse to have the authority to sign documents on your behalf or make medical decisions for you. Although state law may revoke these appointments automatically at the time the divorce is finalized, it is best to have new documents prepared to avoid confusion among third parties regarding who should be acting on your behalf.
We Can Help You Cross the Finish Line
Divorce can be a lengthy process. Before taking the next steps into your new life, call us. We can ensure that you cross the finish line with documents that carry you and your wishes forward.
