Changing family circumstances can be a powerful motivator. Many people only start thinking about estate planning after getting married or having children. As an individual’s family and financial circumstances shift, they may need to make changes to their estate plans as well.
Marital status is one of the most important factors to consider while estate planning. Spouses have certain rights and responsibilities. A spouse can make medical decisions for an incapacitated individual. They have the right to access certain resources when other people cannot. Spouses are often a key consideration when establishing an estate plan. Therefore, a decision to divorce usually means that people need to make major adjustments to their documents.
Removing a spouse as the beneficiary of a will or trust
People usually want to ensure that their spouses enjoy continued financial stability if anything happens to them during their marriage. As such, their spouses may be one of the main beneficiaries included in will or trust documents. Those who are no longer married generally need to remove their spouses as beneficiaries and reallocate the assets previously designated for their spouse’s inheritance to different beneficiaries.
Replacing a spouse in positions of authority
An estate plan can include a variety of documents, including powers of attorney and trusts. People sometimes include their spouses as their designated agents or as co-trustees. Someone who has divorced likely does not want their former spouse making decisions about their medical care or controlling their personal resources. They likely need to select someone else to take over positions of authority during personal emergencies and estate administration.
Addressing secondary documents
Wills, powers of attorney and other estate planning documents aren’t the only paperwork that matters when someone dies. There may also be paperwork filed with insurance providers and financial institutions to update. If an ex-spouse is the beneficiary on record with a life insurance company, changes to a will won’t replace them with a different beneficiary. The testator carrying the coverage has to update the beneficiary designations filed with the insurance company.
They may need to update any deeds that they drafted to transfer property after their death. They may also need to check with their financial institutions to verify if there are transfer-on-death designations for their accounts. They may need to name a different beneficiary to receive the balance of their retirement savings or checking account after their passing.
Updating an estate plan after a divorce gives a testator better protection and peace of mind. Changes to personal circumstances often make a review of estate planning documents a smart decision.