If you are in the midst of an emotional divorce, the last thing on your mind may be how your divorce will affect your future finances and estate. While not the most enjoyable thing to think about, protecting your finances and future plans after a divorce is very important. Particularly in the context of a contentious divorce, failing to change necessary estate planning documents can risk your health and your bank account.
Estate planning is about setting up your assets in a way that will protect them for those that survive you. In order to avoid probate, many financial accounts are structured to “transfer upon death” to a named beneficiary, and jointly owned assets also typically transfer to the joint owner as well.
For many individuals, the primary beneficiary of these accounts and joint assets is their spouse. After a divorce, it is imperative that ex-spouses change these beneficiary designations in order to ensure that their former spouse does not receive all of their assets and funds.
Should a death occur rather suddenly after divorce, financial institutions and banks will not simply transfer these assets to a new third party simply because a divorce has occurred, and the deceased may find that their finances have ended up where they least intended them.
Accounts and legal documents to consider revising include:
In addition to changing beneficiaries and names on accounts and legal documents, any ex-spouse who is receiving child support or alimony payments should consider how to protect those payments in event of death. One option frequently utilized in estate planning is life insurance.
Depending on the amount of money paid each month and the number of years the payments will continue, it may be necessary to have the paying ex-spouse take out a life insurance policy with the payee spouse or children as beneficiary. In the event that the paying spouse is killed or experiences a sudden death, the life insurance will ensure that these payments continue even after death.
Any estate planning changes after divorce must also consider revisions to existing powers of attorney or advanced health directives. Powers of attorney give individuals immense access and responsibility over bank accounts, financial affairs, and legal decisions, while advanced healthcare directives give a third party control over your health in case of emergency or incapacity.
Once a divorce is initiated or, ideally, before it begins, you should make sure to remove your spouse from these important roles or risk giving them continued control over your affairs as litigation proceeds.
If you’ve recently filed for divorce, or are in divorce proceedings, it is easy to feel overwhelmed by everything that is going on and all the decisions that must be made. At Romano & Sumner LLC, our estate attorneys can help to take some of the work off your plate by making the necessary adjustments to your estate documents. For more information, contact us online or at 281-242-0995.
Romano & Sumner, PLLC