After a divorce/dissolution is complete, there are a number of extremely important financial housekeeping items that must be addressed. One of those items that often gets overlooked or put off is revising one’s estate planning documents. The following is a list of those documents and issues which must be addressed, post divorce to ensure that the individual and their family is protected from the unexpected.
- These documents contain instructions about a number of crucial estate planning decisions: who is in charge of administration of the individual’s estate, who is nominated as guardian of minor children, who are the beneficiaries of the estate, and who is in charge of managing assets on behalf of the beneficiaries if they are minors. The last thing a newly divorced individual wants is to have their ex-spouse be in charge of handling their assets should they become incapacitated or pass away. After a divorce, joint trusts need to be dissolved with each individual creating their own with the appropriate updated instructions and properly titled assets.
2.Durable Power of Attorney for Finances/Advance Healthcare Directive
- These VERY IMPORTANT estate planning documents allow for the appointment of an agent to act on one’s behalf to make crucial financial and medical decisions in case of incapacity. Again, the last thing a recently divorced individual wants is to have their ex-spouse in charge of their finances and medical decisions. New powers of attorney should be executed immediately post divorce.
3.Beneficiary Designations (Life Insurance Policies, Retirement Plans, PODs, TODs)
- Beneficiary designations are essentially contracts between a financial institution/administrator and the person who owns the account. These are extremely important because for estate planning purposes they generally trump any outside instructions. Therefore, even if a trust/will document has been updated post-divorce, those instructions will not control an asset with a beneficiary designation attached to it unless the trust is named as a beneficiary. Individuals often forget to update all of their beneficiary designations post divorce. In fact, most people rarely, if ever, update them and this can cause a nightmare when that individual passes away.
4.Titling of all Major Assets
- In estate planning, title means everything! Title dictates to whom and how an asset is transferred at death and who has control over it during lifetime. The most common mistake made in estate planning is simply listing an asset in a trust document. Proper and formal titling of all of the major assets is imperative to ensure that the assets go to whom the individual wants in the way they want it to happen.