Estate planning, and the need to update existing plans, is critically important, particularly after a divorce. Once the dust settles and a settlement is reached (or, in rare cases, a court orders division of assets), former spouses must look at estate planning in the context of their new single status.
Items to consider when updating estate plans after divorce:
- Updating beneficiary designations of life insurance, IRA’s etc. This is particularly important if the divorce agreement or order requires one spouse to maintain life insurance for the other for a period of time.
- Updating all joint accounts
- Creating a new will and/or trust
- Updating health care and financial powers of attorney
- Who should be the guardian of minor children if an ex-spouse cannot
- Who would manage the inheritance of children, particularly minors
One word of caution: I have witnessed several scenarios where spouses agree that, post divorce, one spouse remains the beneficiary of the other’s life insurance or other pay-on-death accounts.The insured spouse assumes that simply leaving the name of the ex-spouse on the beneficiary form will be sufficient. Unfortunately, this will not work.
Arizona law states that all benefits payable to a former spouse are automatically revoked by the divorce unless there is overwhelming evidence that the spouse intended to benefit the ex-spouse. So, simply leaving the ex-spouse’s name on the beneficiary form won’t work because it will be concluded that he or she simply forgot to update. In this situation the spouse must specifically update the beneficiary designation, will or trust to clarify the intention to benefit the former spouse.
Other areas of consideration for divorced spouses can be discussed at counseling meetings. It is important not to put this on the back burner for too long after a divorce.
