Today, divorce is commonplace. Various studies conclude that just over 50 percent of all marriages end in divorce. It is also estimated that the divorce rate is around 60% for second marriages. Divorce can have a devastating emotional impact on both spouses, as well as for children who are caught in the middle. Aside from the emotional consequences of a divorce, a divorce can also have a significant financial impact on both spouses. Divorce typically leaves at least one, and often both, spouses in a worse financial situation than before the divorce. If you have recently been through a divorce, or are currently in the middle of one, it is critical that you also consider the effect of the divorce on your estate plan.
A number of estate planning documents should be reviewed and amended incident to a divorce. Most people will want to remove an ex-spouse as a beneficiary under their will or trust. If you have minor children, you should also consider appointing one or more people as potential guardians of your children in the event your ex-spouse becomes incapacitated or passes way. Retirement plans and life insurance policies may also need to be changed in order to remove your ex-spouse as the beneficiary. While many state’s laws automatically remove your ex-spouse as beneficiary under your will, trust, retirement plans and life insurance policies, you should make the actual changes so there is no question who you intended to receive your estate and to avoid your family having to take a likely trip to court. Lastly, durable powers of attorneys for both property and health care decisions should be reviewed and amended to remove an ex-spouse from having decision making authority under these documents.
Some of the changes described above should be considered and completed even before your divorce is finalized. However, caution needs to be exercised because certain actions, such as changing beneficiary designations on life insurance policies and retirement plans or transferring assets out of a trust, is forbidden under the divorce laws of most states. Any changes to your estate plan incident to a divorce should only be done at the direction of both your divorce and your estate planning attorneys.