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How divorce impacts your estate plan

Estate planning may be the last thing on your mind as you begin the divorce process, but at some point during or following your divorce, you should take legal steps to protect your life's work and make sure the right beneficiaries receive your assets upon death.

Until a judge signs the divorce decree, two people are considered married, and that has legal implications with respect to your estate plan. To limit an estranged spouse's rights as a beneficiary to your estate, it is important to review your estate planning documents as soon as possible and designate someone else to oversee affairs as executor and/or trustee.

Estate planning and your property settlement agreement

If you are in the midst of a divorce and preparing a property or marital settlement agreement (PSA), consider the future effects it may have on your estate plan. PSAs often include provisions for child support and also a requirement for both spouses to maintain life insurance with a designated death benefit as a type of child support substitute in the event of one parent's death.

When crafting a PSA, you should specify permitted uses for funds, especially if the money will be paid directly to your former spouse. Including these details will provide some oversight as long as he or she respects the PSA. The safest solution is to name a revocable living trust with provisions that benefit your child(ren). Through this trust, you can set provisions that specifically dictate how the money should be managed after your death.

For more complex estate planning solutions, like irrevocable life insurance trusts, you should include contingencies for the possibility of future divorce. Trust agreements can specify whether a spouse will continue as a beneficiary and/or trustee in that event.

Updating your estate plan post-divorce

After a divorce, you can take a few steps to ensure an estate plan reflects your current wishes. These steps include:

  • Revoking your will and making a new one
  • Updating beneficiary designations for life insurance policies, retirement accounts, and other accounts and policies
  • Making new powers of attorney, one for health care or medical decisions and one for financial matters

Divorce is a trying time for anyone, and things become even more complicated once you look at the estate plan you built during your marriage. You don't want your assets to end up in the wrong place after you pass. After or even during your divorce, take the time to account for the next stage of your life by reviewing your estate planning documents with your attorney.

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