By Jonathan Goldberg, J.D., CPA
If you have recently become divorced, you have plenty of things to think about as you move forward with your life. But one area that is vital to put on your to-do list is to make sure you have updated your estate plan so that your assets will be distributed per your wishes in the event you pass away.
Here are some things that you should add to your estate-planning “To Do” list after a divorce:
Change Your Beneficiaries– Too often, people who get divorced forget to make changes to their beneficiary designations on such things as bank accounts, life insurance policies and investments, and the result is that the former spouse may end up with assets that were supposed to go to someone else due to the divorce. Court cases have held if one has a retirement plan through work and a former spouse is named as a beneficiary the former spouse will receive the retirement benefit upon your death. Therefore, after a divorce it is extremely important to review and revise your beneficiary designations.
Change Your Will and Powers of Attorney-Updating your will is one of the first things you should do to ensure that your assets will be distributed to your children or other heirs as you wish. It is also important to update your power of attorney so that you designate who you want to handle your financial affairs and medical decisions in the event you become incapacitated. In the past, that may have been your ex-spouse, but that may not be the best choice after a divorce.
Establish a Trust for the Kids-After a divorce it is vital to ensure that any assets you plan to leave to your children are clearly spelled out in your estate plan. And the best way to do that is to set up a revocable living trust that clearly defines what each child will receive, at what age they can receive it and if there are any special stipulations, such as the need to finish college or when they get married. It also protects the children in the event you remarry and have more children with your new spouse (or adopt the new spouse’s children). By doing this, there won’t be any arguments among your children, or even your divorced spouse, as to your intentions when you die.
Pre- Nuptials – Most people know about the value of having a pre-nuptial agreement if they remarry, because it clearly spells out how assets should be split up if the marriage fails or a spouse dies. But a pre-nuptial can also make sure that the assets that you want to pass on to your children from a previous marriage don’t get lost in the second or third marriage mixture of assets. It isn’t uncommon to see famous people’s children suing the estate of their parent who has remarried to make sure they get the assets they feel they deserve instead. A pre-nuptial can ensure that your children don’t have to go to court to inherit what you wanted them to have after your death. In addition, the pre-nuptial agreement spells out what a second spouse may receive upon death or divorce.
The aftermath of a divorce can be hard to deal with, but it is never a good idea to procrastinate when it comes to your after-divorce estate planning. The sooner you make sure you plan is up-to-date base on your new situation, the easier it will be in the long run for you and your children.