How will a divorce affect my estate plan?
In our last blog post, we wrote about the importance of having an estate plan, but there are a number of lifestyle changes that may require modifications to your plan, not the least of which is getting a divorce. Because a marital break-up is a difficult and confusing experience, it helps to have an objective estate planning attorney at the ready to make the necessary changes to your essential documents.
Although some documents cannot be revised until the divorce is settled, it is important to make plans as the case is proceeding and tackle any issues that may affect your estate. Not only should you focus on protecting your assets and any children from your marriage, it is also crucial to organize your financial affairs as you transition into the next phase of your life.
The first consideration is to revise the beneficiary designations in a will or a trust as soon as possible. Additionally, if your ex-spouse was originally designated as your executor, then a parent, sibling or a financial agent should be named to ensure that minor children receive the inheritance you previously set aside for them. It is important to note, however, that some divorce agreements may actually require establishing a trust for the children.
As we have previously advised, your estate plan should also include powers of attorney and advance medical directives. These documents allow you to name a trusted person to manage your financial affairs and make medical decisions on your behalf, respectively, if you become physically or mentally incapacitated. For this reason, it is important to update your power of attorney so that your former spouse does not remain the agent of your financial matters. Although the appointment of an ex-spouse as agent in a healthcare proxy is revoked by law once a divorce becomes final, there is no reason to wait to put a new directive in place.
Finally, beneficiaries of any life insurance policies, retirement plans and other financial accounts should also be revisited, however, some restrictions may apply. In some cases, a divorce agreement may require an ex-spouse to be named as a beneficiary on an insurance policy. More importantly, retirement assets are considered to be marital property that can be divided in a divorce.
In the end, whether your divorce is ongoing or has been settled, it is crucial to ensure that financial agreements entered into during the proceeding do not adversely impact your new estate plan. If you are going through a divorce or need to update your plan for other reasons, the experienced estate planning attorneys at Merlino & Gonzalez can help. From our office in Staten Island, we represent local clients as well as those throughout New York State. Call our office today at (718) 682-7015 to set up a consultation.