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Estate Planning and Divorce
Estate planning is very important to address both during and after a divorce. Divorces typically take several years to be finalized. Consequently, waiting to update every part of your estate plan until a divorce is completed can lead to unintended consequences. Spouses still have legal rights while a divorce is in process. Therefore, it is wise to take steps during this time to create legal and financial distance between you and your soon-to-be ex-spouse.
Laws regarding wills and certain retirement plans, such as pensions and some 401(k) plans, vary from state to state. These require due diligence before changes may be made.
Health Care Proxy, Living Will and HIPAA Release Forms
Once divorce proceedings are under way, new documents should be created naming a new agent under your health care proxy, living will, any other advance directives and HIPAA release form. You may choose a trusted friend, sibling, or other person to take control of your healthcare decisions in the event of an emergency or incapacity. The last person you want to make healthcare or end-of-life decisions is your future ex, even in an amicable divorce.
Update Your Power of Attorney
The same steps must be taken for power of attorney forms. Start by revoking any prior power of attorney documents and have a new power of attorney document created, naming a primary and secondary agent to act on your behalf. the power of attorney will only be effective for assets directly titled in your name alone. However, it is necessary to protect these assets. Depending on your state laws, you may need to provide formal notification to your ex of this change.
Changing Beneficiary Designations
Certain states do not permit spouses to be removed from beneficiary designations for pension plans or some retirement accounts until a divorce is finalized. Make a comprehensive list of all accounts with beneficiary designations and make the beneficiary changes, wherever possible.
If your estate includes a trust, then the trust document needs to be reviewed. Is your ex a beneficiary? This should be changed immediately. If you were generous with members of your ex’s family, you may also want to remove them as beneficiaries.
If you have minor children and the goal of the trust is to provide for them, is your ex named as trustee? If yes, you may want to remove your ex from the role of trustee and name a sibling, close friend or perhaps a professional to serve as trustee.
Revising Your Will
Laws regarding ex-spouses and wills are state specific. However, the best option is always to start with a completely new will. In some states, failing to update a will after a divorce leads to wills being declared invalid, and the estate is treated as if there was no will. Assets are distributed according to the laws of intestacy.
Most importantly, if your spouse is listed as a personal representative, revoke the will and name a new primary and a new secondary personal representative.
Your will is used to name guardians for minor children. Your ex will most likely be named guardian if you should die. However, if you have questions about their ability to be a safe and effective parent or are concerned about their choice of future partners, you can nominate an alternate guardian in your new will.
General Concerns
Divorce can be a stressful process and adding more tasks may seem onerous. However, these estate planning steps are extremely important. In the long run, getting them done may help avoid unpleasant, larger problems for you and your loved ones.
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