Important Steps to Take Immediately Following a Divorce
Following the emotionally draining experience of a divorce, it’s understandable if the last thing you feel like doing is making changes to your estate plan. However, if you don’t take immediate action, your spouse could end up inheriting all your assets and property if the unexpected happens. So, gather up enough energy to make one more call to an attorney – this time, an estate planning attorney. He or she can help you complete the following important tasks.
Step #1 – Update your beneficiaries.
Before you do anything else, update the beneficiary designations on all accounts. Be sure to consider:
- Investment accounts
- Bank accounts
- Savings accounts
- Retirement accounts
- Life insurance policies
- Any other assets that have beneficiary designations
Don’t assume your spouse will automatically relinquish rights to these accounts once the divorce is final. It’s not unheard of for beneficiary designations to supersede state laws. This is especially true for retirement plans, which are governed by a federal law called the Employee Retirement Income Security Act (ERISA) that states a retirement plan administrator must turn over assets to the designated beneficiary. Play it safe and update all beneficiary designations.
Step #2 – Make a new will.
Begin by revoking your existing will, if you have one. Next, work with an estate planning attorney or draft a simple will online. Be sure to make designations for the following:
- Guardianship – One of the most important functions of a will is to designate a guardian for your minor children. While it’s unlikely you will be able to prevent your ex-spouse from taking custody of your kids should something unexpected happen to you, you can select a guardian to care for your children should both you and your ex-spouse be deceased.
If you have concrete reasons why your ex-spouse should not have custody of your children, consider explaining your reasoning in a letter that is attached to your will so that any judge reviewing your case will be aware of your concerns.
- Assets and property – In many states, any gifts you made in a will while you were married are automatically revoked following a divorce. However, that’s not true in all states. To be safe, it’s best to draft a new will to designate how assets, accounts, property and possessions are to be handed down following your death.
- Executor – An executor is the person you designate to handle the affairs of your estate. Most divorced individuals do not want their ex-spouse serving in this role. That’s why it’s important to name a new executor, as well as an alternate executor, as part of your will.
Step #3 – Update your healthcare proxy.
Another important estate planning document is the healthcare proxy. This document allows you to name someone to make healthcare decisions on your behalf should you be incapacitated and unable to make your own decisions. If you don’t already have a proxy, or if your ex-spouse is named to this important role, it’s important to make a change.
Step #4 – Designate a new power of attorney.
Similar to a healthcare proxy, if you don’t want your ex-spouse to have authority over your assets, it’s important to designate a new power of attorney to handle your financial affairs should you become incapacitated.
Step #5 – Create a trust for minor children.
If you have an existing trust, be sure to remove any provisions that include your ex-spouse. If you don’t have a trust, consider establishing one to provide for your children in case you pass away unexpectedly. If you don’t have a trust and your ex is named as your children’s guardian, he/she will have control of your assets until the children reach age 18.
If you don’t want your ex to have control of your assets, consider establishing a revocable trust and name a close relative or friend to serve as the trustee.
If you’d like assistance with estate planning following a divorce, Creative Planning is here for you. We understand how challenging navigating the financial aspects of a divorce can be. As your partner in planning for the future, we’ll help you enter the next chapter of life with confidence. To get started, schedule a call with a member of our team.