Protecting your finances from an ex-spouse after a divorce involves estate planning.
Divorce proceedings involve not only dissolving a marriage but also arranging property and child custody.
After assets have been divided, many people still forget to update their estate plans to reflect the change.
If you wrote a last will and testament during the marriage, it almost certainly does not reflect your wishes after divorce.
Similarly, beneficiary designations on various assets and accounts likely still list the former spouse.
Because these documents control assets after death, people must update their plans to reflect current relationships and wishes.
States have their own laws governing whether an ex-spouse is automatically removed as a beneficiary when named in estate planning documents.
Some states may automatically revoke beneficiary rights of former spouses in a last will and testament or other legal instrument.
Even if so, not all financial accounts will automatically renew the beneficiary designation.
Because life insurance policies and retirement accounts transfer assets directly to a listed beneficiary, one must update these documents rather than assume a divorce decree will make an ex-spouse ineligible to receive the asset.
The best way to protect your estate from being inherited by a former spouse after a divorce is to thoroughly review and update all estate planning documents like your last will and testament, life insurance policies, retirement accounts, transfer-on-death registrations, payable-on-death accounts, and annuities.
When reviewing beneficiary designations, pay close attention to primary and contingent beneficiaries.
Even if you remove an ex-spouse as a beneficiary, your estate could still face issues if your replacement beneficiary dies before you when no contingent beneficiary has been named.
Yikes!
Your beneficiary designations should be aligned with the rest of your estate planning documents and wishes.
Some situations may make directly naming individuals unwise.
For example, minor children cannot legally inherit.
In such cases, a trust would be an appropriate alternative.
Divorce changes property ownership.
Review ownership of bank accounts, real estate, investment accounts, and business interests to update how they will transfer after death.
When an asset is jointly owned, it passes directly to the surviving owner instead of being distributed under the terms of a last will.
If you jointly owned property during marriage, you will need to revisit it to ensure transfer arrangements align with your current wishes.
Death is not the only estate planning factor to be considered after a divorce.
The ending of a marriage should also trigger changes to incapacity planning.
If you become incapacitated, you likely do not want your ex to be your power of attorney in charge of your financial or healthcare decisions.
Advance directives and powers of attorney instruments may not be automatically void under state law after divorce.
Be proactive about updating your documents on your own terms rather than relying on legal rulings.
You must make the decisions regarding who you want to make your medical and financial decisions if you are unable to do so yourself.
Parents of minor children should provide security for the children in their care.
Although an estate planning document cannot overrule the parental rights of another party, it can provide direction regarding your wishes should guardianship become an issue.
Estate planning updates after a divorce rarely require reviewing only one document.
Your last will and beneficiary designations may conflict.
Trusts may suffer from lack of funding.
Jointly titled property may need to be divided.
After a divorce, address all asset ownership and estate planning documents to ensure they are current and work together.
You should also review your plan after subsequent marriages, births, deaths, financial changes, or other life events.
Divorce changes both relational and financial situations for families.
An outdated estate plan can be ineffective and even harmful.
To prevent an ex-spouse from inheriting after your death or controlling your decisions in incapacity, estate planning requires a thorough review.
Update all elements to align with current circumstances and wishes.
Beneficiary designations on retirement accounts, life insurance, annuities, and other assets should be reviewed and updated in addition to your last will.
Property ownership that is still under joint ownership will need to be addressed to ensure the ex-spouse does not automatically inherit after you die.
If a former spouse was named as your agent in your healthcare documents or power of attorney, a new trusted individual should be appointed to make key decisions during incapacity.
Review all elements of an estate plan with an experienced estate planning attorney to ensure they align and work together as intended.
This post is for informational purposes only and does not provide legal advice. You should consult an attorney for advice on any specific issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.
Reference: MSN “Ensure Your Ex Doesn’t Inherit: Avoid Common Probate Mistakes”
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