WHAT DO I DO ABOUT MY ESTATE AS I PROCEED THROUGH THE DIVORCE PROCESS?
A proper estate plan allows you to control your property while you are alive and well, provides a plan for disability, and directs your estate to go to who you want, when you want, and the way that you want. To keep your estate plan current, it needs to be revisited periodically and after changes to your personal, financial or legal circumstances.
Everyone has an estate plan, whether you previously worked with a professional to put one in place, or have left things up to fate. No matter where you are in the Divorce process, now is the time to revisit your estate plan if you have not done so already.
Here are the issues you should consider:
1. Who are your Role Players?
An estate plan is only as effective as the persons you’ve identified to serve in the various roles of your plan. These roles include:
1. Your executor and/or trustee: the person charged with settling your estate upon your death;
2. Your agent under your general power of attorney: the person charged with handling your personal and financial affairs should you become incapacitated; and
3. Your healthcare agent: the person charged with making health care decisions for you should you not able to do so.
What is often the case, a married person will name his or her spouse as the primary appointee in each of these roles. Unless otherwise specifically provided in the will/power of attorney, a Divorce terminates your ex-spouse’s appointment to these roles. This moves your back up executor, agent, etc. to the primary position.
Now is the time to review your plan to ensure that your former back up is suitable to be your primary. What’s the test? Simple – For your executor, trustee, agent: are they trustworthy, and will they be able to recognize and call for help if they’re in over their heads? For your healthcare agent: if you were hospitalized tomorrow, who would be there at your bedside? Anyone who fails these is not an appropriate person for the job.
Also, and this is important, if you do not have a written plan, you are leaving this appointment to the courts to decide, and who wants that?
2. Have you updated your Beneficiary Designations?
Whereas a Divorce terminates all provisions in a will in favor of the ex-spouse, Divorce does not automatically remove a spouse as a beneficiary of life insurance, 401k, IRA, or annuity. Even if your Divorce decree states your ex-spouse is not entitled to these proceeds, you should not require your heirs to have to prove to the, insurance company, etc. that your ex-spouse is not a beneficiary.
Take away: Spend a few minutes and update all of your beneficiary designations to reflect the terms of the Divorce and your new wishes.
3. Have you considered creating a Living Trust?
Do you have minor children? A child with special needs? An heir who would not do well with the sudden inheritance of wealth? A living trust can not only avoid court proceedings at your death, but it can also ensure that your heirs receive their inheritance free from your ex-spouse, without court intervention, without risk to government benefits, and in such a manner that does no harm nor is subject to being squandered.
Discuss the benefits of a living trust with your estate planning attorney.
4. Should you revisit your Professional Relationships?
Whether you’re looking for a fresh start, or you are in need of professional advice, post-divorce is an important time to revisit or establish professional relationships regarding your retirement, wealth management, taxes and legal matters. Having the right professional on your team can provide tremendous value in both dollars and cents and peace of mind for you and your family.
I’d encourage you to consider addressing these issues during your Divorce transition. While the issues to be addressed are many, with the right help it does not need to be arduous.
Estate Planning During Divorce and Separation is Important!
Divorce is tough. We get that, but it’s important to dot all your i’s and cross all your t’s. In addition to all the Divorce and Separation paperwork, a updated, proper, and correct estate plan is also a must.
The best way to ensure that everything goes as smooth as possible is by hiring a professionals to help you.
You’ve taken the first step which is to learn all you can about the Divorce Process. For more information that can help you work through your Divorce please check out our blog.
These 4 Tips were brought to you by Andrew Cobin. Andrew is an estate and elder law attorney at the Brady Cobin Law Group, PLLC. Andrew helps individuals and their families in the planning and administration of their estates. Andrew can be reached at [email protected] or 919.825.1519.