Perhaps no life event imposes a more significant – and urgent – need to update an estate plan than a divorce. A divorce generally causes a radical change in both personal finances and family dynamics; in nearly all cases, both the husband and wife no longer want the ex-spouse to be a beneficiary to the other’s estate plan. If children are involved, the need to protect and provide for them following a divorce is of paramount importance.
Many people incorrectly believe that a divorce automatically cancels out the estate plans that were in place prior to the divorce. With this in mind, Leslie V. Marenco, attorney with Marenco Warshofsky Padron Rodriguez & Marrero, PL shares the top three action items to consider immediately with regards to your estate plan:
Revoke Your Will/Trust
Start by revoking your old Will and drafting a new one. If you don’t have a Will, now is the time to design one. The same applies if you made a living Trust while you were married.
A Will is where you: 1) Leave your property to the people you love; 2) name an executor to wrap up your estate when the time comes; and 3) nominate a guardian to take care of young children, should it be necessary. All of these choices are affected by divorce.
If you’re like most people, you made a Will while you were married and left all your assets to your spouse, which is likely not the result you want now. It’s best to start fresh with a new Will, naming new beneficiaries and alternate beneficiaries. Be cautious of leaving anything directly to minor children as they do not have the legal capacity to own and manage assets.
Name a Guardian for Minor Children
If you are a parent with young children, your estate plan should begin with a foundation that ensures your children will always be taken care of by the people you want and in the manner you would like. Having the necessary documents in place for the day you can no longer be there for your family is certainly important for everyone; however, for families with minor children, it is a necessity.
Think about it: if the unthinkable were to happen to you, who has the authority to take care of your children in an emergency situation? How about for the long term? Who can make medical decisions for the children, if you cannot? The last thing any parent wants is for their children to end up with Child Protective Services while an emergency situation is sorted out.
Update Beneficiary Designations
As important as your Will or Trust is, it might not cover some of your most valuable assets. Many assets pass outside of a Will or Trust to beneficiaries named on paperwork provided by a bank or insurance company.
A plan administrator must turn funds over to the beneficiary named in the plan documents. So if your former spouse is still the named beneficiary, her or she will inherit those assets.
Going through a divorce is a major life event that can leave you feeling battered and bruised. Understandably, the first thing on your mind during this difficult time is likely not your estate plan. Yet, this is the time when you absolutely need to update or create an estate plan.