While it may seem somewhat counterintuitive, the perfect time to think about possible changes in your estate plan is when you are going through a divorce. It is at this time you can identify any possible errors in the plan that may have been created prior to the divorce and update the plan to meet your new needs.
How Divorce Effects Trusts and Wills
One of the most important aspects of estate planning is to create a trust. The trust is a legal instrument used to transfer the ownership of property to a trustee who holds the property for the benefit of the beneficiary. The trust and the trust assets do not have to go through probate when the person who made the trust passes away. This is very different from a will, which does have to go through probate to be effective.
During your marriage you may have established a trust, for tax advantages or to create a clear plan in the event of death or divorce. While you are going through your divorce, it is a good idea to review the information in the trust to determine if your desires are still reflected within.
When it comes to your child or children, it is a good idea to establish a revocable living trust. This trust stipulates that certain arrangements need to be made when specific events occur. For example, new trustees may need to be named if a spouse passes away while the trust is still in place. Trusts can also determine the way trust funds are able to be used, such as for the health and education of your beneficiaries. If your trust directs that upon your death your assets are to pass to your spouse, then you may want to update your trust when you are going through a divorce to prevent your ex-spouse from having an interest in your trust property.
Additional Tools for Estate Planning to Use During Your Divorce
Your estate plan needs to include a regular review of your beneficiary designations on life insurance policies and retirement plans. In many cases, these are going to need to be changed when you are going through a divorce.
For example, you may have named your spouse (who you are now divorcing) as the health care power of attorney, financial power of attorney, or the executor of your will. Since these powers can be extremely broad, many lawyers recommend that if you are thinking about filing for a divorce, you should remove your spouse and appoint someone else whom you trust. Rather than your spouse, you can name an adult child, close friend, sibling, or parent.
There is no question that going through a divorce can be a difficult and overwhelming process. However, you have to think about the legal documents you have in place and how they may be affected once the divorce is final. If you are unsure if changes need to be made in your estate plan, then you should speak to The KC Estate Planner, LLC. They can help provide guidance through this difficult process.