A divorce can be a long, expensive, and emotionally draining process. However, the work does not end once the divorce decree is signed. In order to ensure that your assets and estate planning wishes are carried out in light of this major life change, there are three things you must do as soon as possible.
Change Beneficiary Designation on Life Insurance
A life insurance policy is a contract between you and the insurance company. You designate the beneficiary (the individual(s) or entity who will receive the proceeds upon your death) and the insurance company will pay them when you die. Because the beneficiary designation is a legally binding contract, the insurance company is obligated to pay the individual listed as your beneficiary. If your ex-spouse is listed as the beneficiary at your time of death, they will pay the funds out to him or her. Legally, it does not matter to the insurance company if the two of you are now divorced.
Update Beneficiary Designation on Retirement Plans
Although some state laws may automatically revoke a designation on a retirement plan if the ex-spouse is listed, federal law states that the last-named beneficiary is the one who is entitled to the funds. Depending upon what type of retirement account you have, it might be the state law that controls, or the federal law. To avoid a potentially long and costly battle for your family, it would be wise to change the listed beneficiary as soon as possible.
Create or Revise Your Estate Plan
If you and your former spouse had a joint trust, you will need to have your own individual trust created to hold the assets that are now in your name only. In the new plan, you will need to think about who to name as the trustee and beneficiary. If you have minor children, you may also need to consider who is going to be the individual to manage those assets on behalf of your children. In many cases, you probably don’t want your ex-spouse in these roles.
If you do not currently have any estate planning documents established, now is the perfect time to get everything in order. After going through your divorce, you probably have a good idea as to what assets you own and their value. This will be very helpful as we discuss the right estate plan for you.
Your estate plan is more than just a trust. It can include documents such as a financial power of attorney and healthcare power of attorney. Whether you have them already or need to have ones executed, this is a crucial time to review them. Chances are you no longer want your ex-spouse to have the authority to sign documents on your behalf or make medical decisions for you. To avoid confusion by third parties as to who should be acting on your behalf, make sure to call us so we can update these essential documents.
We can help you cross the finish line
Divorce can be a drawn-out process. Before taking those fresh steps into your new life, call BVTLAW so we can make sure you cross the finish line with documents that are able to carry you and your wishes forward.