Why a Solid Estate Plan is Even More Critical if You're Getting Divorced
Most people understand the importance of getting good legal advice from a divorce attorney when they are going to separate from their spouse. Yet many may not recognize the need for legal guidance from an estate-planning attorney in that situation.
Ideally, you and your spouse have a good estate plan in place, especially if you have children. At least, it may have been good while you were happily married. However, everything changes with the prospect of separation and divorce.
If you never got around to doing your estate plan while you were married, it is even more critical to get a solid plan in place once a divorce is on the horizon. This is because, when there is no estate plan, the law will designate your spouse as your heir and decision-maker. Until your divorce is final, you are still legally married and your spouse is likely entitled to receive your assets and act as your decision-maker in many cases, even though you may be separated or have filed for divorce.
Consulting with an estate-planning attorney can protect you, your family and your assets—even if you believe the divorce will be amicable. There are specific things to consider and steps to take before, during and after the divorce. For example:
- Before: Your spouse is likely your power of attorney, and a disgruntled spouse can potentially misuse that power (e.g., by transferring assets away from you). Now is the time to revoke that power of attorney and designate someone you trust to that role.
- During: Make sure that your Property (Marital) Settlement Agreement or Divorce Decree contains provisions that work with your current estate plan and provide flexibility for future estate planning. In particular, it is very common to include provisions requiring one or both ex-spouses to maintain life insurance for the benefit of children. You should make sure the terms permit a trust to be the beneficiary under those policies.
- After: After the divorce is final, it’s important to change beneficiary designations on all of your retirement accounts (e.g., IRAs, 401(k)’s, and the like) and any pension plans. The reason is that under federal law, even after you are divorced, if you do not change the beneficiary on your retirement account or pension plan, your now former spouse could remain legally entitled to the proceeds.
David Knasel is an estate and business attorney helping clients through the legal process of their business and estate planning matters, with a focus on helping them achieve their goals.