Updating your estate plan after a divorce should be at the top of your must do list.
Forbes’ recent article, “9 Things You Need To Know About Estate Planning After Divorce” suggests that, if your divorce was finalized in 2018, prior to the effective date of the new rules providing that alimony is no longer tax deductible, it’s time to revise your estate plan. It’s also good idea for those people who divorced in prior years and never updated their estate plans.
Let’s look at some of the issues you should be thinking about:
See your estate planning attorney
Right off the bat, send your divorce agreement to your estate planning attorney, so he or she can see what obligations you have to your ex-spouse in the event of your death.
Healthcare Directive
This document lets you designate someone to make health care decisions for you if you were incapacitated and not able to communicate those wishes yourself. You may wish to remove your ex-spouse as your agent.
Power of Attorney
If you had an old Power of Attorney that named your ex-spouse, it should be revoked, and you should execute a new Power of Attorney naming a friend, relative, or trusted advisor to act as your agent regarding your finances and assets.
Your Will and Trust
Ask your attorney to remove the provisions for your ex-spouse and remove your ex-spouse as the executor and trustee. If it is still your intention to keep those terms in place, execute new post divorce documents to memorialize that.
Guardianship
If you have minor children, you can still name your ex-spouse as the guardian in your will. Even if you don’t, your ex-spouse will probably be appointed guardian if you pass away, unless he or she is determined by the judge to be unfit.
A trust for your minor children
If you don’t have a trust set up for your minor children, and your ex-spouse is the children’s guardian, he or she will have control of the children’s finances until they turn 18. You may ask your estate planning attorney about a revocable trust that will name someone else you select as the trustee to access and control these funds for your children if you pass away when they are still minors.
Life insurance
You may have an obligation to maintain life insurance under the divorce agreement. Review that with your estate planning attorney. For any benefits not payable to your ex-spouse, be sure and update beneficiary designations accordingly.
Beneficiary designations
Be certain that your 401k and IRA beneficiary designations are consistent with the terms of your divorce agreement. Aside from that, have the beneficiary designations updated to reflect your wishes. Even if you still want to name your ex-spouse as the beneficiary, execute a new beneficiary designation dated after the divorce. It’s also wise to leave a letter of intent with your attorney, so your intentions are clear and enforceable.
Prenuptial agreement
If you’re thinking about getting remarried, consider a prenuptial agreement. At a minimum, it’s a good time to set up a separate property estate plan, preferably with a revocable living trust, so that your property can remain clearly separate property if you later remarry.
Post divorce is a great time to settle these outstanding issues from your divorce and get your estate plan in order to better reflect your future.
Reference: Forbes (January 8, 2019) “9 Things You Need To Know About Estate Planning After Divorce”