11 Aug Your Divorce Is Complete. Now What About Your Estate Plan?
Most people don’t plan to get divorced. Unfortunately, it’s a process that many find themselves having to go through, sometimes more than once. By the time you are done with your divorce, you may be sick of the legal system and sick of lawyers. There are, however, several critical estate planning tasks you should address as soon as possible after your divorce is complete.
For many people, a divorce filing is the first significant legal event of their lives. So follow along and let us try to help you traverse the many pitfalls of estate planning after divorce by either bringing to attention your unforeseen issues or reinforcing known concerns, and the priority status you should attach to finalizing their details.
Do your designated beneficiary instructions need to be updated?
First, and maybe most important, you need to review your designated beneficiary instructions on your retirement accounts and life insurance policies. While there can be state laws and federal requirements that limit or prohibit your ability to change beneficiaries until your divorce is complete, it is important to know where and when you can make these changes. Most states have some form of prohibition specifically against making changes during the divorce process, and then changes can be made after the divorce have been finalized.
Your designated beneficiary instructions are contracts with the companies to which you have provided them, the purpose of which is to get this money out to those you have listed almost immediately. They do not care about your divorce or how much animosity you may now have for your ex. Although many states, Colorado among them, have statutes that authorize an insurance company or stock brokerage to treat a spouse from whom you got divorced as though they pre-deceased you even if you never removed them from your instructions, many companies ignore those statutes and follow the instructions as written, even if they clearly should have been updated.
Do your power of attorney documents need to be updated?
Second, after any divorce, you must review and revise your power of attorney documents. Your financial power of attorney likely gives your now ex-partner access to accounts, safe deposit boxes, retirement funds, and even your mail. You need to find those documents and ensure that they list the people to whom you mean to give these powers. Limiting your exposure to emotional people in emotional times who might have access to all of your liquidated assets or to choices concerning your end of life decisions, is always important and should be first on your list of concerns.
Similarly, if you were in an emergency medical situation, would you want the hospital to be waiting for guidance from your ex-spouse, or taking guidance from that ex-spouse over other family members, because your medical power of attorney says that is what you want?
Does your will need to be updated?
Third, do you have a will that predates your marriage? If so, then you should consider revisiting the document to assess what assets you have linked, and who is in charge of your financial affairs in the case you become incapacitated or pass away during the divorce process. The process of divorce should be viewed exactly the same as after the divorce has become final. All documentation linking the two of you needs to be severed exactly the same way that it would be had you never been married in the first place.
Would your kids need a trust to hold their money for them?
Third, you need to review the terms of any trust agreement that you put into place for your kids. If you have trust, it likely says your ex will manage your kids’ funds for them as their trustee. Although a court will likely assign all day-to-day parenting duties to your ex if you pass away, it does not mean that your ex has to be put in charge of the money that you left your kids. Giving those purse strings to someone for whom you may have more trust can be one of the most effective ways to ensure your kids are raised with your values, even if you are not available to personally ensure that happens.
Do you have any instructions regarding your memorial service?
Finally, you should account for who will be in charge of your memorial services. Would you want a funeral home waiting on confirmation from your ex-spouse that the plan to which your family has agreed is acceptable?
Estate planning after divorce: Let us help you
The McKenzie Law Firm stands ready to help you with any questions, concerns, and organizing of your estate plan for your life now and the lives of your loved ones going forward. Contact us today to see how we can improve productivity and minimize your risks of your estate plan. After finishing all the necessary legal changes to your estate plan, you will then be able to provide, through the best of your ability to, any children, any business relationship, any charity, any pets caught in the crosshairs of your divorce, and for yourself, in your post marriage life.
(Thank you to our 2019 summer law clerk, Douglas Gasca, for his substantial contributions to this post.)