Finally getting married and starting a new life and family together is one of the most exciting periods in anyone’s life. Marriage can turn opening accounts and filing all kinds of documents into romantic testaments to a lifelong partnership. When you and your new spouse are planning for your estate, it can feel like you’re really setting out for a long life together. For some people these feelings turn out to be completely merited but, unfortunately, sometimes life has other plans.
Divorce can and does, happen. You don’t have to currently be experiencing divorce to prepare for it. Even if you’re currently in a happy marriage, divorce is never an impossibility. You owe it to yourself to be prepared for any eventuality and know how to conquer whatever curveballs life throws your way. Furthermore, should the worst come to pass, there’s a lot to worry about during a divorce and sometimes it’s easier to not deal with what seem like minor issues. However, the impact that divorce can have on your estate planning is tremendous, and if you don’t know specifically what needs to be altered then divorce can throw your plans into complete disarray.
Most people forget to check and update their estate planning documents regularly in general. Continuing this laxness during divorce can lead to devastating results. An ex who you have no attachment to could end up receiving the bulk of your assets. Worse, if you are incapacitated they could be able to override the decisions your family make to keep you healthy. That’s why after a divorce it’s so critical to check and update documents. Furthermore, you never know when disaster may strike, so you can’t delay correcting every item on your estate planning document list.
It’s easy to say you need to change your estate plan. In reality, many people have incredibly complicated plans with a combination of accounts, wills and trusts. Poring over so many documents and finding out exactly what needs to change is a difficult proposition. As previously mentioned though, this difficulty is rivalled by the tremendous importance of making the change. We want to help you make sure your true wishes are preserved and that divorce can’t throw a wrench into the works. That’s why we invite you to keep reading as we explore the intersection of divorce and estate planning.
Updating Retirement Accounts and Insurance Policies
Updating retirement accounts and insurance policies is sometimes forgotten when changing an estate plan. However, they are important documents that can represent significant amounts of money. Even if these accounts aren’t exactly full of money, a dollar that doesn’t go to your ex is a dollar that does go to someone who cares about you. Thoroughness is always an important quality in estate planning and making these alterations can ensure that you have more power to help the people that you truly care about after your passing.
If you have an IRA, 401k or other retirement accounts then you owe it to yourself to make sure it goes where you want it to. Unfortunately, you may need to wait before the divorce is finalized before changing the beneficiaries for your retirement accounts. Don’t let that obstacle dissuade you from making the change though. Retirement accounts can sometimes represent a hefty chunk of your assets and since they aren’t typically covered by a will you need to remember to change them.
It’s also important to update the beneficiaries on any insurance policies you may have. This is also often forgotten and not making the change can lead to those you care about being robbed of the money they need. Unfortunately, if your life insurance policy lists your ex-spouse as an irrevocable beneficiary, you won’t be able to alter this designation without their consent. If this is the case, and your ex refuses to consent, you may need to take alternative measures such as canceling your life insurance policy entirely. By remembering to update both your retirement accounts and insurance policies you are maximizing the money that is distributed according to your true wishes.
Updating Your Will and Trusts
Oftentimes when a couple first gets married they take a fresh look at their estate planning. Since for many people wills and trusts are synonymous with estate planning, most newlyweds have updated these to reflect their new marital status. These changes need to be undone following divorce. Cutting your ex-spouse out of wills and trusts can be easier said than done. There can be tricky areas, especially with trusts, that you need to examine in order to ensure you’ve done a thorough job. However, not updating these documents can mean having the majority of your estate end up in the hands of your ex.
With wills, it’s important to go over the entire document and ensure that your ex is no longer represented. It may be difficult to choose who should replace your ex, after all, estate planning decisions are never easy. However, it’s vital to start thinking about these changes as soon as possible so that you can update your will quickly. You’ll also want to work to ensure that your ex has no grounds to contest your will. While making sure that your witnesses are competent and trustworthy can mitigate the chances of contestation you can also go one step further. Consider explicitly stating that you do not want your ex or their family to get their hands on your property so that there’s no confusion when distributing your assets. Such a declaration can go a long way towards stopping contestation and ensuring that the executor of your estate has a clear understanding of your intentions.
With trusts, there is a little more to check than with wills. First, you will want to make sure that the trusts you intend to change are revocable. Irrevocable trusts will be difficult to change, often requiring a long legal process and consent from beneficiaries. Assuming that your trusts are revocable, your obvious first step will be to ensure that any trusts with your ex as a beneficiary either have that designation changed or are canceled altogether. It’s important to consider taking things a step further though, if your ex or their family have any kinds of administrative roles in your trusts you may consider removing them from those positions. For instance, if your divorce wasn’t amicable, you may no longer be able to rely on your ex to act as a trustee and disburse assets to your children.
Wills and trusts likely encompass the bulk of your estate planning. That’s why it’s so important to go in-depth and ensure that you’ve completely altered them to reflect how you really want your assets to be distributed. Even the smallest mistakes in these corrections can open the door for your ex to walk away with huge chunks of your estate. So, you need to either be extremely attentive to detail or hire an attorney who has that same attentiveness. Just because wills and trusts likely allocate where the majority of your assets go after death doesn’t mean that they’re the most important part of your estate planning to alter after divorce though. Making sure that you’re taken care of by someone who has your best interests at heart while you are still alive is just as important if not more so.
Changing your Advance Directive
One of the most common questions people ask about estate planning documents is “what’s the difference between a will and a living will?” The difference between a will and a living will is that a living will is a part of the advance directive which is a collection of documents. The advance directive details what you want to happen should you somehow become unable to make decisions regarding your own healthcare. Two of the documents in an advance directive are a living will and a health care proxy. The living will dictates what decisions you want made regarding your healthcare and the health care proxy designates someone who you want to make decisions that aren’t covered by the living will.
Like retirement accounts and insurance policies, living wills and advance directives are estate planning documents that are often forgotten because of the recognition is given to trusts and the more well-known type of wills. This can be a huge mistake. With an advance directive there’s more than just money on the line, your life may hang in the balance. Even if your ex wouldn’t make decisions that are directly malicious regarding your health, you need to make sure they aren’t in charge of your care. After all, that position should go to the person closest to you who is most likely to both understand your wishes and care enough to enact them. It’s highly unlikely that your ex meets that criteria. That’s why you need to amend your health care proxy so that someone more qualified makes decisions on your behalf. That way you can rest assured that even should something happen down the road, you will be taken care of.
The responsibilities placed on your health care proxy are huge. You may struggle to find someone who is both capable of fulfilling the task and willing to accept such an emotional burden. If you aren’t immediately sure who should replace your ex, that’s okay. By expanding your living will and the conditions of your health care proxy you can reduce the responsibilities laid on your proxy. That means that you can have the most important foreseeable medical decisions already made and documented. In this way, if you aren’t completely certain that your proxy is a good fit, you can ensure that they only have to deal with matters that are minor or less easily predicted. Of course, once these alterations have been made you should seek a more ideal candidate, but this is a great way to protect yourself in the meantime.
Who Else is Involved?
It’s fitting that just as divorce affects more than just the previously married couple, you and your ex aren’t the only ones who should be considering making estate planning alterations. Depending on the length of your marriage, and how close your ex became to your family, it’s entirely possible that they are included in the estate plan of your friends or relatives. For instance, maybe your parents thought of your ex like a child and decided to designate certain heirlooms for them. At first it can feel like there’s nothing that you can do. After all, you don’t have control over their estate planning decisions.
It’s possible that your friends or relatives may still want to include your ex in their inheritance. However, they deserve to be informed enough to truly make the decision for themselves. You may choose to gently remind those close to you that their estate plan may be out of date in light of your divorce. On the other hand, if you feel that these individuals are capable of managing their own affairs, perhaps a reminder isn’t warranted. How to proceed is up to you and will likely vary with each friend or relative who you believe may have decided to leave something to your ex. However, no matter what you decide to do, it’s important to keep in mind that the estate plans of you and your spouse aren’t the only ones impacted by divorce.
So far we have explored one of the most common goals in estate planning after divorce, cutting out your ex-spouse entirely. Sometimes though, this isn’t possible. If you signed a prenuptial agreement then it’s likely that you can’t entirely remove them from all your estate planning documents. In order to stay on the right side of the law it’s important to thoroughly review your prenup and take account of the limitations it places on your estate planning. Then you need to make sure that any changes or revocations you make are in accord with the agreement. This can be daunting and you don’t want to do anything to violate the terms of your prenup. Luckily, a careful legal team can help you by reviewing your prenup and using their legal expertise to make as many changes as possible without violating the agreement.
Maybe you are well within your rights to deny your ex any part of your estate, but you still choose to include them. After all, every divorce is different. If you had a more amenable departure from marriage it makes sense that you may be considering leaving your ex something. This decision, like any estate planning decision, is a challenging one that requires careful thought. Furthermore, if you choose to renege on this decision it can be costly. That’s why it’s recommended that you consider the situation carefully and try to separate your emotions from the decision-making process. If you do choose to leave something to your ex, make sure to communicate exactly what you’re leaving them clearly either in your estate planning documents or to whoever is helping you make alterations to them.
One last consideration is that you may want to leave something to family members of your ex while passing them over. For example, it’s common to feel a parental bond with the children of an ex-spouse. If this is the case then it’s even more important to clarify this intention. Make sure that you not only clearly state that you want to leave money to the family member, but also ensure that your intention to not leave anything to your ex is clear. While trusts are always a good idea in this situation due to their resilience against contestation, they deserve extra consideration if you want to leave assets to a minor. Whether or not to include your ex, and their relatives, in your estate planning is neither a trivial decision nor an unimportant one. It mandates introspection but is a choice that you must make.
How to Prepare
It’s easy to not think about any of what has been mentioned when divorce isn’t on the table. When a marriage is going well, no one wants to prepare for the possibility of things turning sour. However, trusting that your marriage will last forever can be naive at best and emotionally and financially damaging at worst. Life is usually long, and you never know what may happen tomorrow let alone five or ten years down the road. If you aren’t currently facing divorce then you’re in luck. There are simple estate planning decisions that you can make while your marriage is strong in order to mitigate the damage that divorce may wreak should things fall apart.
The most important decision that you can make is to always opt for revocable trusts and insurance policies. As has been discussed, these documents are much easier to update and amend when they were not made irrevocable. Getting an irrevocable trust with your spouse as a beneficiary can be akin to getting a tattoo of their name, it may sound good at the time but should divorce come you’ll regret it. If you aren’t married yet then you have even more power to secure your estate planning. By ensuring that any prenuptial agreement doesn’t place restrictions on your estate plan in the event of divorce you can reserve the right to entirely cut your spouse out of your inheritance. When it comes to both estate planning and divorce the saying “an ounce of prevention is worth a pound of cure” definitely rings true.
As is clear, there’s a lot of ground to cover in order to update estate planning documents in the wake of divorce. One must investigate all of their estate planning documents including retirement accounts, insurance policies, wills, trusts and more. Furthermore, one must reflect and determine exactly what they want to have happen to their assets should the worst come to pass. This is neither quick nor easy, especially not when dealing with all of the emotions that come along with divorce. However, whether you decide to trust a legal team to shoulder the work for you or risk immersing yourself in a sea of documents, it is necessary.
It’s important that you amend your estate planning documents as soon as possible. Different documents can only be updated at different times, but luckily some pieces of your estate plan can even be updated before you finalize your divorce. For instance, you can change all of the designations revolving around your will and any trusts before getting divorced. Should you not update your will before the divorce is finalized and pass away before the divorce goes through, you risk having your entire estate end up in the hands of your spouse. Even if you don’t have a will there’s cause to make one since dying without a will in New York also entails your whole estate going straight to your spouse. However, updating some of your life insurance policies and retirement accounts will require you to finalize the divorce first. In light of this, it’s important to go through your estate planning documents and figure out the earliest you can alter each one, then make those alterations when they’re first possible. Since you never know when disaster may strike you need to start protecting yourself as early as you can.
The intersection of divorces and estate planning involves legal areas that are usually very distinct from one another. So, few legal teams have the knowledge and finesse to handle updating estate planning documents when divorce happens. Of course if you’re looking for an estate lawyer NYC is a great place to be, but it can still be difficult to find a suitable legal team. Morgan Legal Group is one of the few legal teams that can handle such a complicated situation. We offer the attentiveness and personalized service required to make sure we rehaul your entire estate plan and leave nothing out. When going through a divorce you have enough to worry about, let us take estate planning off your mind. Schedule a consultation and find out what we can do for you.
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