Getting Divorced: How Does That Affect My Estate Planning
Learn how divorce affects the estate planning process and how to make adjustments with this guide.
Are you filing for a divorce soon? You're not alone. About 746,900 couples file for a divorce every year. Getting divorced will affect your estate planning.
There's no way around it; getting divorced is stressful. Unfortunately, not many people consider just how much it can impact their futures. For example, It is very likely that you will need update your estate plan.
Your final divorce will settle financial and legal matters between you and your spouse. It won't change your divorce documents, though. Instead, you need to consider how your divorce and estate planning go hand-in-hand.
Otherwise, you might neglect to revise important documents.
Here's everything you need to know about how getting a divorce will affect your estate planning. Reviewing this guide can help you make more important decisions regarding your future. Read on to learn more.
First, it helps to consider the connection between estate planning and divorce.
Think about the documents you prepared before or while you were married. For example, your last will and testament. The documents won't change, even after getting divorced.
However, there's a chance you left money or possessions to your spouse. It's also possible you gave your spouse permission to handle medical decisions on your behalf. Perhaps you named them as the individual to handle your finances as well.
Once you're divorced, you probably won't want to give your ex permission to these matters of your life anymore. Instead, you'll need to revise your estate planning documents right away.
If you don't have estate planning documents filed, it's still possible your spouse is the beneficiary on your:
- Retirement account
- Life insurance policy
- "Payable on death" bank account
Your ex might still receive money, even if you name someone else after you're divorced.
Before that can happen, consider consulting an estate planning lawyer in Chandler. You can outline your new goals and priorities to ensure your plans reflect your preferences.
Are Assets Safe From a Divorce?
All property and assets are subject to scrutiny during a divorce. You might consider an Asset Protection Trust for your investments, though.
What Happens to My Trust?
The type of trust you initially created with your former partner can impact what happens to your trust during a divorce. If the trust was irrevocable, you likely won't have to make changes.
For a revocable trust, you'll likely need to divide it like any other asset. To understand the difference between a revocable and irrevocable living trust in Arizona you may want to read this article.
Documents to Review
About 60% of US adults don't have a will yet. If you don't have one already, consider planning your estate with an experienced attorney.
If you already have estate planning documents, it's time to make changes that represent your new life and future. For example, you might want to consider your:
- Last Will and Testament
- Health care Power of Attorney
- Beneficiaries for all your accounts
- Financial or General Power of attorney
- Living Trust
- Guardianship for minor children
- Life insurance policy
Having an estate planning lawyer at your side will help you navigate the process of reviewing these documents and amending them.
Your Existing Will
Before getting divorced, you might want to revoke your existing will. If you don't have one yet, now is a great time to create one.
Your current will might outline that your spouse is the executor of your will. You'll probably want to choose someone else before getting a divorce.
You also might want to consider who you chose as the guardian for your minor children.
If your divorce proceedings will remain civil, you can discuss this detail with your spouse. You might feel comfortable keeping this detail as-is.
Review the details that are already documented and make changes as necessary. Some laws have laws in place about what happens to parts of an estate plan after a divorce. Make sure to review the relevant laws with your attorney.
Your Health Care Power of Attorney
It's also possible that you listed your spouse as your health care proxy in your power of attorney. In other words, they have the authority to make any health-related decisions on your behalf. Your proxy will voice your wishes if you're ever incapacitated.
If your divorce is amicable, you might want to still keep this as-is. Otherwise, consider changing it.
New Beneficiaries and Power of Attorney
Any named beneficiaries will receive money or assets outlined in your will or trust. However, you might want to update your:
- Pay on death (TOD) accounts
- Retirement accounts (401k and IRAs)
- Life insurance policies
Varying states have different laws and requirements about handing beneficiaries after a divorce. Your divorce agreement might outline these details as well.
Determine who you're giving power of attorney to.
A Living Trust
If you don't have one already, consider setting up a trust after getting divorced. Your trust handles child support and alimony. It directs funds to your heirs as well.
Your trust could prove beneficial if you don't want an ex-spouse to become a child's guardian after you pass away. A revocable trust can name someone other than your ex-spouse as the trustee. You can appoint a trustee to control your assets and money for the benefit of your children after you pass on. That is specially important if you have minor children.
Guardianship of Minor Children
You might consider your guardianship documents important if you're going through a contentious divorce. You might have an ex-spouse with substance abuse problems. If you're concerned about who becomes the provider for your children, review these documents.
Your Life Insurance Policy
Make sure to review your life insurance policy (or policies). Consider how many policies are paid for. Determine what each policy guarantees, too.
In some cases, you won't have to do anything regarding your life insurance policy. However, make sure you have an understanding of what each policy states.
Determine who is responsible for and who will benefit from your policies, too.
Getting Divorced: Start Making Changes to Your Estate Plan Today
If you're getting divorced, it helps to not walk into the situation blind. Instead, talk to your estate planning attorney. They can help with planning your estate or making the necessary changes after your divorce.
Reviewing your documents now could save you stress down the road.
Eager to schedule a consultation? We're here to help.
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