Did you know the current divorce rate among married couples in America is 40-50%?
Yes, that’s right. Half of all Americans will get divorced in their lifetime.
Divorce can be traumatic for the whole family. Even if the process is amicable, it involves many tough decisions, legal hassles, and painful emotions that can drag out over several months or years.
While you probably do not want to add any more items to your to-do list during this trying time, it is absolutely critical that you review and update your estate plan as soon as possible once you know the split is inevitable.
Florida law considers you to be legally married until the judge signs the final judgment ending the marriage.
This means if you die while the divorce is still ongoing and you have not updated your estate plan, your soon-to-be-ex spouse could end up inheriting everything. Maybe even worse, in the event you are incapacitated before the divorce is final, your spouse would be in complete control of your legal, financial, and healthcare decisions.
Given the fact that the relationship is ending, you probably do not want soon-to-be-ex spouse having that much control over your life and assets. If that is the case, you must take action.
Unless they also handle estate planning, your divorce attorney is probably not thinking about these matters on your behalf. This could be problematic as updating your estate plan is one of the most critical matters you need to handle if you’re ending your marriage (Side note: My law office provides family law counseling and services in addition to family estate planning. Just sayin’!).
When divorce is on the horizon, the following are a few of the most important updates you should consider making to your estate plan as soon as possible:
1. Update your power of attorney documents for healthcare, financial, and legal decisions
If you are incapacitated during the divorce proceedings, who would you want making life-and-death healthcare decisions on your behalf? If you are in the middle of divorce, chances are you will want someone other than your soon-to-be-ex making these important decisions for you. If that is the case, you must take action. Contact me now – do not wait until it is too late.
Similarly, who would you want managing your finances and making legal decisions for you? In light of the impending split, you will most likely want to select another trusted individual if things are anything less than friendly between you and your soon-to-be-ex. Again, you have to take action if you do not want your spouse making these decisions for you.
2. Update your beneficiary designations
Failing to update beneficiary designations for assets that do not pass through a will or trust – such as life insurance policies and retirement accounts – is one of the most frequent, and tragic, planning mistakes made by those who get divorced.
For example, if you get remarried after your divorce but have not changed your retirement account or life insurance beneficiary designation to name your new spouse, your ex-spouse could end up with your retirement savings upon your death.
Daaaaaaaaamn! Not good.
Most retirement plans allow you to freely change your beneficiary without your current spouse’s written approval, such as Individual Retirement Accounts (IRA) and qualified pensions. However, for a 401(k) retirement plan, no matter what, you must first receive your current spouse’s written approval before naming someone else as your beneficiary. As such, you can opt to move funds out of a 401(k) into another retirement account, but this is not always advisable or even possible, so you must contact an estate planning lawyer before making this decision.
Furthermore, in Florida, like most other states, once a spouse files for divorce and until the divorce is final, neither party can legally amend their beneficiaries without the other spouse’s written permission. Given this, if you are anticipating a divorce, and if permitted by law and/or the account administrator, you may want to consider changing your beneficiaries prior to filing divorce papers. If your divorce is already filed, you should consult with me to see if changing beneficiaries is legal and in your best interest.
Finally, if naming new beneficiaries is not an option for you before the divorce proceeding are started, once the divorce is finalized it should be your first estate planning priority. In fact, put it on your to-do list right now!
Next week, I will continue with Part 2 in this series on the critical estate planning updates that you should make when divorce is inevitable.