Divorce brings many considerations – child support arrangements, asset division, and alimony can be contentious issues. When dealing with the emotional and financial considerations of divorce, estate planning is likely the last thing on your mind. But it’s an essential part of the healing process. Learn about the importance of estate planning and find out how to change your will after you divorce.
Revoking Your Will
Your estate plan should reflect your current wishes. If you forget to revise your will, your assets will be distributed among your beneficiaries upon your death – and that may include your ex- spouse.
To avoid this scenario, it’s easiest to revoke your current will and request a new one. Shredding all copies is the easiest way. Making a new will is a matter of choosing a DIY or professional approach. You may elect to purchase a software package that drafts a will for you, or hire a lawyer to help with the process.
In its most basic state, a will should:
• Leave property and assets to designated beneficiaries,
• Name an executor to handle the terms of your will in timely manner, and
• Elect a guardian to assume custody of minor children, should it ever become necessary.
In some cases, gifts you bequeath in your will are revoked automatically in the event of divorce. The state of California, for example, has such a law. It’s not wise to rely on state law, however, since there can be potential complications. Gifts and property could pass through your ex-spouse. If you didn’t name an alternate beneficiary, your bequests will automatically be distributed evenly to your nearest surviving relatives.
A Note About Choosing an Executor
An important aspect of designing your will is naming an executor, who will be responsible for carrying out the terms of your will upon your death. If you named your ex-spouse as your executor, California law will give the job to your designated alternate, but again, it’s unwise to rely on the law.
How should you choose a new executor? It’s tempting to elect a friend or closest relative, but your chosen executor should be temperamentally fit to execute your will. They must be vigilant about filing paperwork when it is due, attending to deadlines, and be organized enough to see your will through to the end. Select a person who is highly organized and willing to adhere to these obligations in a timely fashion.
Updating Beneficiaries for All Assets
In the course of revoking or revising your will, you’ll designate new beneficiaries for all your assets, including:
• Life Insurance policies
• 401k and retirement accounts
• Pay-on-death bank accounts
• Brokerage accounts
Naming new beneficiaries will require submitting new paperwork from the bank and insurance companies. Request this documentation as soon as possible after your divorce.
Changing the names on your retirement accounts, such as any IRAs, is especially important. Legislation called the Employee Retirement Income Security Act protects these assets. ERISA asserts a plan administrator must release accounts to the named beneficiary, no matter what state law says. In other words, if your ex-spouse is still the named beneficiary on your accounts, he or she will inherit your savings, in spite of California’s probate law terms.
Finally, it’s essential to name a new power of attorney, someone who will make decisions on your behalf if you become unfit to do so. You should have two powers of attorney – one for medical decisions and another for financial decisions. Consider your choices carefully.
Reviewing and updating your will at regular intervals is essential, especially in the face of divorce. A proactive approach will ensure a smooth transfer of assets among your beneficiaries in the event of your death.