Few personal situations change someone’s finances and future plans more abruptly than divorce. The resources in someone’s name, their standard of living and even their obligations to others typically shift dramatically during divorce proceedings.
Often, they need to make significant changes to their existing estate planning paperwork as part of the divorce process. If someone did not have an estate plan before, they very likely need formal documents once they end their marriage.
What estate planning moves are typically necessary for those who have divorced?
Removing spouses from their documents
An individual’s spouse often plays a key role in their estate plan. Their spouse could be a trustee empowered to control valuable assets or the agent named in their power of attorney documents. Spouses are often beneficiaries in wills and trusts. They could also be the person named as the main beneficiary for a life insurance policy. Both estate planning paperwork and documents filed with financial institutions often require review and revision when someone divorces.
Protecting against future risks
A spouse is a crucial buffer against the uncertainty of the future. Spouses can access someone’s financial resources or make choices about medical care on their behalf. While some people authorize their spouses to act on their behalf with special paperwork, the law extends them certain rights that no other people enjoy. Someone without a spouse is more vulnerable than someone with one in the event of incapacitation or a similar emergency.
People who previously did not create powers of attorney and advance directives because they trusted a spouse to manage their needs in an emergency may now need to expand their estate plan to include those documents. If they have minor children and plan to leave an inheritance for those children, they may also want to consider creating a trust, as their spouse could gain control over those assets if they die while the children are still young.
A divorce can be a powerful reason to create an estate plan if someone does not already have one. Otherwise, this life transition generally requires that someone adjust their documents for enhanced protection if they had a basic plan in place during their marriage. Ultimately, reviewing estate planning needs after a divorce can make someone feel more confident about their future security.