Getting Divorced? Make These Important Estate Planning Changes
The things that make up a marriage – love, trust, respect – are usually long gone well before the judge signs the final judgment for dissolution of marriage at the end of a divorce. But before a divorce proceeding is filed and while it is pending – which can be for years – a lot doesn’t change, such as the beneficiary of your insurance policy, the person who gets to make health care or financial decisions for you if you become incapacitated or the trustee of your trust. However, when those individuals are your soon-to-be-former spouse, you may want to make some changes to your estate plan before your divorce that will reflect your new reality.
If you don’t review and modify your estate plan pre-divorce, it could wind up being too late to make the necessary changes if something happens to you during the divorce process. Remember, you are still married while your divorce is pending, which means that all rights as a spouse remain the same until a final judgment for dissolution is entered. That is unless you take affirmative steps to change them.
If you are contemplating a divorce or are in the middle of one, consider taking some or all of the following steps, but only after consulting with our Alpharetta divorce lawyers, estate planning attorneys, and any financial advisors.
Changing Beneficiaries in Your Will or Trust
If you have a will or revocable trust, you may want to change those documents to ensure that your spouse is no longer a beneficiary or trustee of your assets. If you haven’t already done so, you should also name a guardian for any minor children in case both you and your spouse die during the divorce proceedings. If your estate planning documents already provide for a guardian for your child, you should attempt to confirm or reach an agreement with your spouse as to the identity of the guardian going forward.
Changing Beneficiaries in Retirement Plans
The amounts you have contributed to retirement plans such as 401(k)’s, Individual Retirement Accounts (IRAs), and pension plans over the years may be some of the most substantial assets in your personal portfolio. Generally, contributions made to such plans over the course of the marriage are marital property subject to equitable division.
These plans also provide for the designation of beneficiaries for the proceeds of the plans in the event of your death. Under federal law, a spouse will always receive the assets in a 401(k) unless they sign a written waiver and consent to the naming of another beneficiary. The same goes for qualified pension plans. But no such consent is required to change the beneficiary under your IRA. You may remove your spouse as a beneficiary at any time, even while you are still married.
While changing your beneficiary designations if possible is important, it only impacts what happens to the proceeds in your account upon your death. How those accounts are treated, valued, and divided before then will be resolved in your divorce proceeding.
At minimum, divorcing individuals should inventory all insurance and retirement plans with beneficiary information so that the beneficiary can be changed immediately after the divorce if they have not been beforehand.
Revoking or Revising Financial Powers of Attorney
A financial power of attorney is a document in which one party gives authority to another party to handle their financial and economic affairs in the event they become incapacitated or are otherwise unable to make or communicate their decisions on such matters. Most married couples give their spouse such authority in these documents. If you named your spouse as your agent in a durable power of attorney, he or she can act and make decisions on your behalf in the event you become incapacitated. That means they could withdraw money from your bank accounts, enter into agreements for you, and buy or sell property in your name.
Presuming you don’t want your spouse to retain that power, you should revoke and change these designations so that they will no longer be able to act on your behalf the client during the divorce proceeding. Execute a new durable power of attorney designating someone else as your agent.
Revoking or Revising an Advance Directive for Health Care
As with a financial power of attorney, an advance directive for health care gives a designated individual the power to make health care decisions on your behalf if you become incapacitated, consistent with your intentions and desires as outlined in the document.
If you have an existing advance directive (or a Durable Power of Attorney for Health Care created before June 30, 2007) that gives your spouse the power to make health care decisions for you in the event you are unable to do so for yourself, you may want to revoke it and execute a new one designating someone other than the spouse as agent. If you do revoke or change your directive, make sure you follow all statutory requirements for execution and give a copy of the document to your physician and the person you designate as your agent.
Get New Insurance
If you currently get your health or other insurance through your spouse, consider obtaining new health, auto, homeowner’s or renter’s insurance.
Again, you should not make any decisions about these important assets and other estate planning issues without first discussing such matters with your attorneys and advisors. But planning ahead, including making the necessary changes to your estate plan, can be an essential part of a divorce that proceeds smoothly and leaves you with clarity and security as you begin the next chapter of your life.
Call the Alpharetta Divorce Lawyers at North Metro Litigators Today
The Alpharetta divorce lawyers at North Metro Litigators provide effective, comprehensive, and compassionate divorce representation at a reasonable cost. Call us today at (770) 517-0045 or contact us to arrange for your free initial consultation.