Estate Planning and Divorce: Why Update Your Estate Plan?
Divorce is a life-changing event that impacts various aspects of your life, including your estate plan. Many people focus on the division of assets or child custody agreements during a divorce, but an often overlooked area is estate planning.
If you've recently divorced, it is vital to update your estate plan to reflect your new reality and protect your future. Below, we discuss why estate planning after divorce is so important.
1. Your Beneficiary Designations May Be Out-of-Date
After a divorce, one of the first things you should review is your beneficiary designations. These include:
- Bank accounts or certificates of deposit
- Investment accounts
- Life insurance policies
- Payable-on-death (POD) accounts
- Retirement and pension accounts
- Vehicles and real estate for which you’ve named a transfer-on-death beneficiary
If your ex-spouse is still listed as a beneficiary, they may inherit these assets, even if your divorce agreement states otherwise. To avoid unintended consequences, make sure to update these designations as soon as your divorce is finalized.
2. Your Need to Review and Revise Your Will
Your will is another critical document that needs attention when estate planning after divorce. Many people initially include their spouse as the primary beneficiary and executor of their estate.
After a divorce, you may want to name a new executor and designate different beneficiaries, such as children, family members, or charities. It's also a good idea to consider who you would like to be the guardian of your minor children if something happens to you.
3. Create or Update Trusts
If you have a trust in place, you’ll need to amend it to ensure that your ex-spouse is no longer a trustee or beneficiary unless you specifically want them to be. In some cases, creating a new trust may be a better option, particularly if you want to provide for your children while keeping the assets protected from your former spouse.
4. Adjust Powers of Attorney and Healthcare Directives
Divorced individuals should also update their financial and healthcare power of attorney documents. These documents allow someone to make decisions on your behalf if you’re incapacitated. In most cases, people name their spouse as the decision-maker, but after a divorce, you may no longer want that person in charge of your financial or medical decisions. Consider appointing a trusted friend or family member instead.
5. You Can Protect Future Relationships & Blended Families
Estate planning after divorce can also help you ensure a new spouse and any children from a previous marriage are provided for. Without proper planning, your estate could be subject to legal challenges, potentially leaving your loved ones without the assets you intended for them.
6. Clarify Guardianship for Minor Child
You and your ex-partner likely have a custodial agreement in place concerning who has legal and physical custody of minor children after a divorce. However, you should be sure to name a guardian and property manager in your will, especially if you have not included provisions in your custody agreement giving the other parent full custody in the event of your death.
If you wish for your ex to retain custody, you can name them as guardian in your will. You should still nominate one or two other people to be the successor guardian in case you both pass.
Protect Your Future. Discuss Estate Planning and Divorce with Us!
Going through a divorce is difficult enough without worrying about your estate plan. However, taking the time to update your estate planning documents after a divorce can save you and your family from unnecessary complications in the future.
At Oak City Estate Planning, we have dedicated our practice to helping clients, including recently divorced individuals, protect their assets and ensure their wishes are honored. We are backed by over 30 years of legal experience and can help you make informed decisions when updating your estate planning documents.
Contact us today at (919) 975-5359 to schedule a consultation and let us help you navigate estate planning after divorce.