Divorcing a spouse impacts nearly every aspect of your life. Regardless of whether the divorce is simple or messy, you may have to contend with finding a new home, coordinating child custody, juggling friendships, and of course, coping with the emotional impacts. While this can all be overwhelming, don’t let updating your estate plan get lost in the shuffle.
Neglecting to revise your estate plan after a divorce can have substantial financial consequences. Whether you are in the midst of a divorce or the divorce has been finalized, remember to revisit these three key elements of your estate plan.
Last Will and Testament
Many people assume a divorce automatically nullifies a Last Will and Testament. Some states do have provisions that prevent ex-spouses from inheriting, but the only way to ensure your ex-spouse will not collect is to revoke the previous will and execute a new, legally binding will in its place. Your new will should address who should receive your property and name an executor.
If you have children, your will should also specify a legal guardian. Typically, your ex-spouse will receive sole custody unless the court deems the surviving parent to be unfit. If you feel strongly your ex-spouse is unfit, you can attach a memorandum to your will detailing the reasons. Keep in mind, the court is not required to follow your guardianship recommendation, but will take your concerns into consideration. Consult with your estate planning attorney before naming a guardian in your new will.
Beneficiary Designations on Retirement Accounts and Life Insurance Policies
Beneficiary designations on retirement accounts, such as IRAs and 401(k)s, and insurance policies supersede those made in a will. If you neglect to update the beneficiaries on these accounts, your ex-spouse could receive a windfall, instead of those you actually intend to receive the benefits from these accounts.
Powers of Attorney
Most estate plans include powers of attorney – a document allowing a person or entity broad powers to manage your affairs in the event you become unable to oversee your affairs. It is not uncommon for people to appoint their spouse as their financial power of attorney and/or medical power of attorney. During divorce proceedings or once the divorce is finalized, you can submit a document revoking all powers of attorney from your ex-spouse and subsequently appoint a different person or entity as your financial and/or medical power of attorney.
You may also want to encourage other family members to review their estate plans to see if your ex-spouse is listed as a beneficiary or set to receive an inheritance.
Removing your ex-spouse from some or all aspects of your estate plan can be a complicated process. Having a trusted estate planning advisor makes it more manageable. To review your estate plan after a divorce, contact a Fifth Third Bank financial advisor today.