Updating Your Estate Plan for Divorce: 5 Changes to Make
If you’re planning to file for a divorce or have already gotten the ball rolling on your separation, there are some vital steps you should take as soon as possible to shore up your financial future. While there are often plenty of immediate financial fires in need of putting out during the early stages of a divorce, it’s important to give equal consideration to the long-term financial implications of your decoupling.
Even in the most amicable of divorces, you’ll want to be proactive about making any necessary changes to your estate plan to head off any costly confusion down the line. Failing to do so could impact your financial situation later in life and may even do serious damage to your children or other next of kin. Here is a quick explanation of five changes you can make to your estate plan to protect your future post-divorce.
What is an estate plan?
An estate plan is a set of legal documents and directives that outline how you’d like your financial assets and end-of-life care decisions to be handled if you pass away or become otherwise incapable of making these decisions on your own. For married couples, many of these responsibilities fall to a spouse, who may be responsible for decisions about medical procedures, long-term care, and the division of financial assets and personal effects.
Estate plans are typically supported by documentation such as wills, powers of attorney, advance directives, and, in some cases, trusts. Some changes happen automatically once the divorce is final, but others require you to update documents yourself. If your divorce is still pending, or if powers of attorney have not yet been revoked or superseded, your spouse may still have decision-making authority.
Estate plan changes to consider
If you would like to retain your autonomy and prevent your ex from asserting undue control over your health and finances later in life, it’s important that you proactively change your estate plan to better reflect your preferences. Here are five changes you’ll want to weigh with your divorce attorney when making decisions about your long-term financial plan:
1. Update your will
Your will determines how your next-of-kin or other beneficiaries will distribute your property after your death. Many married couples choose to list one another as the primary beneficiaries of their estates in their wills, which makes sense if they plan on staying married. When a couple gets divorced, however, they often choose to remove one another from their wills and redistribute their assets accordingly.
If your soon-to-be ex is listed as the primary beneficiary in your will and you no longer want them to be, you should revisit that designation as soon as possible. That’s because Texas law only voids will provisions pertaining to a former spouse once a divorce decree has been issued. While this approach can save you some labor post-divorce, it can also leave you vulnerable if you pass away before your divorce is finalized. If you’d rather not risk the confusion and legal headache, updating your will now can help to ensure your bases are covered in the event of an unexpected loss.
2. Review your beneficiary-designated accounts
Some assets, like life insurance policies and certain retirement accounts, don’t change hands based on the stipulations of a will. Instead, they pass directly to a named beneficiary upon the account holder’s death. Your divorce lawyer can help you locate any beneficiary-designated accounts in need of review and help you designate a new, more appropriate beneficiary of these vital assets.
3. Modify powers of attorney and medical directives
Wills and retirement accounts aren’t the only components of an estate plan. Financial and medical power of attorney documents are often key elements of end-of-life plans because they clearly identify who should be granted the legal authority to make vital decisions on your behalf prior to or after your passing.
If you previously selected your spouse as your agent, you may want to revisit and reassign this designation while working through your divorce. These changes may be needed on both financial and medical power of attorney documents, as well as any HIPAA release forms or advance directives you’ve signed. Making these changes proactively can prevent conflict down the line and ensure the right person is taking the lead on any critical end-of-life decisions that may arise.
4. Revisit trusts and shared assets
If you and your spouse created a trust together, you may need to change the structure in light of your divorce. These adjustments can be highly complex, as different kinds of trusts employ different structures and contingencies. Some trusts — like irrevocable trusts — can be difficult or impossible to modify without court approval, beneficiary consent, or other provisions.
To avoid any unnecessary confusion and ensure your assets are divided properly among your preferred beneficiaries, it’s often wise to work with both your divorce lawyer and an estate planning attorney. These professionals will better understand the nuances of Texas law and can help you make decisions that protect your financial future without crossing any lines from a legal standpoint.
5. Secure your accounts
An often overlooked financial component of post-divorce estate planning is updating and securing all bank accounts. With the rise of mobile banking across the U.S., it is particularly important to secure your digital wallets and banking apps in order to prevent your former spouse from accessing funds without your knowledge or consent.
In order to lock down your digital accounts, you’ll want to update your mobile banking passwords, emergency contacts, and account recovery options to ensure your ex cannot log into your accounts without permission. Even if it seems like no big deal to keep your ex listed as an emergency contact or to keep their number listed as an account recovery resource, these small oversights can cause major confusion and prevent you from exercising your rights in the event of an unauthorized purchase or withdrawal.
Final thoughts
We all hope for the best when navigating the “new normal” after divorce. However, your financial future should not be taken lightly – even if you think divorce is mutual and amicable. While Texas law provides some failsafes for divorcees when it comes to their wills, there are plenty of other estate documents you’ll want to update in order to safeguard your assets.
At the Law Office of Matthew A. Grimshaw PLLC, we understand how challenging it can be to keep track of all the legal tasks and document changes associated with the Texas divorce process. Whether you’re just starting to consider filing for divorce or are looking to gauge your financial options moving forward, our team can provide you with the support you need to make informed decisions about your future.
Contact us to schedule a confidential consultation, and let’s discuss how our team can support you through this transition.