Monday, October 11, 2010

What to Do With Your Estate Plan After a Divorce

When it comes to estate planning, the steps you take after a divorce are not so different from the steps you’ll take after a death—many of the phone calls will be the same, many of the changes you make and details you change will be similar.  This all makes sense, because a divorce is basically the death of your marriage, and in the financial and legal world your marriage was an entity all its own.

The first question most people ask is “Who gets the estate plan?” The answer is that both of you and neither of you get the estate plan. Ideally, you both put a lot of thought into your estate plan and it reflects both of your wishes.  All of this work was not for nothing.  The details of your plan will have to change, this is true, but the basic ideals will most likely be the same.

Your first order of business should be to change your beneficiary designations.  Most married couples name their spouses as the primary beneficiary on insurance policies, retirement accounts, wills and trusts, with their children or immediate family members named second.  Unless you think your ex-spouse deserves to benefit from all your hard work you’ll want to remove him or her as a beneficiary immediately. (Documents to change: will, trust, ALL life insurance policies, IRA or 401(k) accounts, savings accounts, investment accounts, POD or TOD accounts, credit card insurance policies.)

Your second order of business will be to amend your agent/executor/trustee.  It is likely that while you were married you named your spouse as the primary person in all of these roles; you’ll now want to move your secondary nominee to the primary position, or find someone new. (Documents to change: will, trust, All powers of attorney, health care directives, nomination of conservator, emergency contact forms.)

Not necessarily your third order of business, but somewhere in there you may want to change your nomination of guardian.  You and your ex-spouse probably chose people you both knew and trusted to be guardians of your minor children if anything happened to both of you.  Divorce can bring up many powerful emotions and hard feelings, so although these people are probably still good and trustworthy people, you may want to nominate someone else.  Depending on your custody arrangement, your ex-spouse will still be your children’s primary guardian if anything happens to you.  This doesn’t mean you shouldn’t execute a new nomination of guardians, but keep in mind that your nomination of guardians will only come into play if your spouse dies first. (Documents to change: nomination of guardians, anti-nomination of guardians, nomination of conservator, emergency contact forms, authorization for custodian consent to medical treatment of minors.)

The most important thing to remember is that the more you put it off, the more likely it is that your wishes will go unacknowledged. As a rule, it’s a good idea to visit your estate planning attorney after any life change, especially one as significant as divorce.