Divorce can be traumatic for the whole family. Even if the process is amicable, it involves many tough decisions, legal hassles, and painful emotions that can drag out over several months, or even years.
That said,
while you probably don’t want to add any more items to your to-do list during
this trying time, it’s absolutely critical that you review and update your
estate plan—not only after the divorce is final, but as soon as possible once
you know the split is inevitable.
Even after you file for divorce, your marriage is legally in full effect until
your divorce is finalized. That means if you die while the divorce is still
ongoing and you haven’t updated your estate plan, your soon-to-be-ex spouse
could end up inheriting everything. Maybe even worse, in the event you’re
incapacitated before the divorce is final, your ex would be in complete control
of your legal, financial, and healthcare decisions.
Given the fact you’re ending the relationship, you probably wouldn’t want him
or her having that much control over your life and assets. If that’s the case,
you must act, and chances are, your divorce attorney is not thinking about
these matters.
While California law limits your ability to completely change your estate plan once your divorce has been filed, the following are a few of the most important updates you should consider making as soon as possible when divorce is on the horizon.
1. Update your power of attorney documents for healthcare, financial, and legal decisions
If you are incapacitated by illness or injury during the divorce, who would you want making life-and-death healthcare decisions on your behalf? In the midst of divorce, chances are you’ll want someone other than your soon-to-be ex making these important decisions for you. If that’s the case, you must act immediately; don’t wait.
Similarly,
who would you want managing your finances and making legal decisions for you? Considering
the impending split, you’ll most likely want to select another individual,
particularly if things are anything less than friendly between the two of you.
Again, you must take action if you do not want your spouse making these
decisions for you. Don’t wait.
2. Update your beneficiary designations
Failing to update beneficiary designations for assets that do not pass
through a will or trust, such as life insurance policies and retirement
accounts, is one of the most frequent—and tragic—planning mistakes made by
those who get divorced. If you get remarried following your divorce, for
example, but haven’t changed your IRA beneficiary designation to name your new
spouse, the ex you divorced 10 years ago could end up with your retirement
savings upon your death.
That said, once either spouse files divorce papers with the court, neither party can legally amend their beneficiaries without the other’s permission until the divorce is final. Given this, if you’re anticipating a divorce, you may want to consider changing your beneficiaries prior to filing divorce papers. If your divorce is already filed, once the divorce is finalized making these changes should be your number-one planning priority. In fact, put it on your to-do list right now!
Next week, we’ll continue with part two in this series on the critical estate-planning updates you should make when divorce is inevitable.
Dedicated to empowering your family, building your wealth and defining your legacy,
