How to Build an Estate Planning To-Do List After Divorce

Divorce is a life-altering event that brings about significant emotional and financial changes. One area often overlooked in the midst of the upheaval is estate planning. Whether you are looking to update your will, revise beneficiary designations, or reevaluate your trust arrangements, it is essential to take swift action to ensure that your estate planning documents reflect your new situation. After all, divorce can significantly impact your financial future, and failing to update your estate plans could lead to unintended consequences for your heirs.

In this article, we'll walk through how to build an estate planning to-do list after divorce. This guide covers essential steps to take, common mistakes to avoid, and key considerations that will help you protect your financial interests and ensure that your wishes are honored after your divorce is finalized.

Why Updating Your Estate Plan is Crucial After Divorce

After a divorce, your priorities and family dynamics are likely to change dramatically. Many people mistakenly assume that a divorce automatically revokes their previous estate planning decisions, but that is not the case. While certain aspects of estate planning, such as beneficiary designations, can be affected by divorce, other documents---like your will and trusts---may remain in effect until they are officially updated.

Updating your estate plan after a divorce is crucial for the following reasons:

• Protection of Assets: Divorce can affect ownership of your assets, so it's important to ensure your property is divided as you wish in the event of your death.
• New Beneficiaries: You may want to change the beneficiaries of your life insurance, retirement accounts, or other assets, especially if your ex-spouse was previously listed.
• Reevaluating Guardianship: If you have minor children, your choice of guardians may need to be updated in light of your new circumstances.
• Avoiding Confusion or Legal Disputes: If you don't make the necessary updates, it can lead to legal disputes, delays, or confusion when your estate is settled.

By reviewing and revising your estate planning documents, you can ensure that your wishes are clearly stated and legally binding.

Steps to Take After Divorce: Building Your Estate Planning To-Do List

1. Review Your Will

One of the first and most important steps after a divorce is to review and update your will. Divorce can significantly change who you want to name as beneficiaries, executors, and guardians, so it is essential to make adjustments as soon as possible.

• Remove your ex-spouse as a beneficiary: If your ex-spouse was previously named as a beneficiary or executor, it's essential to remove them immediately. If you don't, your ex could inherit part or all of your estate, depending on the terms of the will.
• Update guardianship designations: If you have children and had previously named your ex-spouse or their family as guardians, you'll need to reconsider this decision and name a new guardian.
• Consider new beneficiaries: As part of this process, you may want to name new beneficiaries, such as your children, friends, or other family members.
• Appoint a new executor: If your ex-spouse was named as the executor of your will, you will need to appoint a new one. The executor is responsible for managing your estate after your death, so choose someone who is trustworthy and reliable.

2. Update Trusts

If you have established a living trust or any other type of trust, it's essential to review the terms and amend them if necessary. Trusts can have far-reaching implications for your estate, and they may have provisions that no longer align with your wishes post-divorce.

• Change beneficiaries: Just like with your will, you may need to update the beneficiaries of your trust. This is especially important if your ex-spouse was named as a beneficiary in the trust's terms.
• Revise the trustee: If your ex-spouse was serving as the trustee (the person responsible for managing the trust), you should appoint a new trustee who is neutral and trustworthy.
• Review trust terms: Divorce might change how you wish to distribute your assets, so review the terms of the trust to ensure they align with your new priorities.

3. Revise Beneficiary Designations on Retirement Accounts, Life Insurance, and Other Assets

Beneficiary designations override any provisions in a will, meaning that assets such as retirement accounts, life insurance policies, and investment accounts may still pass to your ex-spouse unless you make the necessary changes.

• Update retirement account beneficiaries: Make sure that your retirement accounts (401(k), IRA, etc.) have been updated to reflect your new wishes. This is especially important since, in many cases, retirement accounts go directly to the named beneficiary upon death, bypassing the will entirely.
• Change life insurance beneficiaries: If your ex-spouse is named as the beneficiary on your life insurance policy, you'll need to revise this designation. Consider naming your children or another trusted person as the new beneficiary.
• Review other accounts: Ensure that any other accounts with beneficiary designations, such as annuities or payable-on-death bank accounts, are updated accordingly.

4. Consider Setting Up a New Power of Attorney

A power of attorney (POA) allows you to designate someone to act on your behalf if you are unable to do so due to incapacity. If your ex-spouse was previously listed as your POA agent, you should revise this document immediately to appoint a trusted individual instead.

• Durable power of attorney: This type of POA remains in effect even if you become incapacitated, so it's important to select someone who will act in your best interest.
• Health care power of attorney: Similarly, you should update your health care POA, which designates someone to make medical decisions for you if you are unable to do so yourself.

5. Create or Update a Living Will or Advance Directive

A living will or advance directive is a legal document that outlines your wishes regarding medical treatment and end-of-life care in case you are unable to communicate these decisions due to an illness or accident. Divorce is a good time to review and update this document to ensure that it reflects your current desires.

• Choose a new health care agent: If your ex-spouse was previously designated as your health care agent (the person who makes medical decisions on your behalf), you'll want to choose a new agent who will respect your wishes and advocate for your care.

6. Evaluate Your Financial Plan

Divorce often comes with a significant shift in financial circumstances. It's important to take the time to evaluate your financial situation and make any necessary adjustments to ensure your assets are protected and your financial goals are still attainable.

• Review beneficiary designations: Ensure that all your financial accounts, such as life insurance policies, investment accounts, and retirement funds, reflect the updated beneficiary information.
• Consider long-term care needs: If you are a single parent, you may want to explore long-term care insurance to ensure that your children or other loved ones are not burdened with your medical expenses should you become ill or incapacitated.
• Update your budget: Divorce often results in changes to income and expenses. Make sure that your budget aligns with your current financial situation and goals.

7. Revisit Your Estate Plan Regularly

Once you have updated your estate plan, it's important to review it regularly, especially after significant life changes, such as a remarriage, the birth of children, or changes in financial circumstances. Regular reviews ensure that your estate plan reflects your current wishes and that your assets are distributed according to your preferences.

• Review every few years: Life changes constantly, and so should your estate plan. Set a reminder to review your documents every few years or after major life events.
• Seek professional advice: It's often a good idea to consult with an estate planning attorney or financial advisor who can guide you through the process and ensure that your documents are legally sound and effective.

Conclusion

Estate planning after divorce may seem like an overwhelming task, but it's a critical step to ensure that your assets are protected, your family is cared for, and your wishes are carried out. By building a comprehensive to-do list and addressing each aspect of your estate plan, you can create peace of mind knowing that your affairs are in order.

From revising your will and trust to updating beneficiary designations and powers of attorney, every change you make plays a significant role in safeguarding your financial future. Take the time to make these adjustments, and don't hesitate to seek professional advice when necessary. After all, your estate plan is one of the most important tools you have for ensuring your legacy is protected for those you love.

View Product