Separation and divorce send shockwaves into nearly every aspect of a person’s life, including family structure, finances, and future plans. All too often, the process is long, costly, and emotionally draining, especially if you are not on good terms with a soon-to-be ex. Estate planning can often be forgotten amidst the numerous other legal and emotional issues that separation and divorce bring. However, it is vital to review any current estate planning documents, review beneficiary designations, and to consult with an experienced estate planning attorney so that your current plan is aligned with your current wishes.
Review Your Estate Planning Documents
Do you have estate planning documents such as an Advance Medical Directive (AMD), Durable General Power of Attorney (DGPoA), Will, or Trust? If you do, you should review them for instances where your ex is named, especially if they are given power to make decisions on your behalf. These documents comprise the basic documents in an estate plan and govern what happens to your health and wealth if you are incapacitated or pass away. Bring your documents to an experienced estate attorney and talk through what changes you would like to make. They can also flag issues that you may not have thought about and advise you on how to proceed in your individual situation.
If you do not have estate planning documents, now is a great time to create them. Every state has its own set of laws that govern what happens to the wealth of an individual if they do not have documents of their own and are either incapacitated or pass away. These laws will guide the court as they make final decisions about who will be responsible for managing your health and wealth, and ultimately who will receive it. By getting your own set of documents, you can choose who will act on your behalf, which can limit the involvement of both the legal system and your ex.
Review Beneficiary Designations on Your Accounts
A beneficiary designation is something that you can set up on most bank, investment, and retirement accounts. Often, it is referred to as a Transfer on Death (TOD) or Pay on Death (POD). When there is a POD/TOD on an account, the POD/TOD functions as a mini estate plan for that asset alone and bypasses any other estate planning documents you may have.
For example, you may now want your wealth to go to your children and not your soon-to-be ex when you pass away. Even if you get updated estate planning documents, if you have an old 401k you never updated that lists your ex as the beneficiary, your ex will receive those funds no matter what your documents say and no matter how long it has been since the divorce was finalized.
It is worth the time to review each and every one of your accounts to make sure you know what would happen to them if you pass away, and to make any changes if needed. We have developed a free resource to help you organize your assets in one comprehensive document. This serves the dual function of allowing you to easily see your assets and how they are owned and endorsed, as well as serving as an extremely helpful tool for your agent if you are incapacitated or pass away.
As you align your estate planning documents and financial instruments with your new goals, confirm with your attorney before making major changes to accounts, especially accounts held jointly with your ex. As proceedings move forward, assets could be controlled by court orders, state law, or a separation agreement. Given the complexity and emotional tension involved in most divorces, it is always worth double checking these critical documents.
While the process of creating or updating estate planning documents and reviewing your beneficiary designations takes time during an already difficult season of life, it is a meaningful and worthwhile step as you move into the future with confidence and hope.