Changing Beneficiary Designations
Many people have substantial assets that do not pass through probate. For example, your life insurance, investment accounts, and retirement accounts probably required that you name a beneficiary when you opened them. This beneficiary will inherit the account when you die.
Probably the last person you want to take this property is your ex-spouse, so you need to update your designations on these policies. You also need to think carefully about who you name. People with high net worth frequently are worried about the tax implications of their estate plan, so you want assistance from a seasoned attorney who can consider the best way to achieve tax-deferred growth.
You should also change the beneficiary designations in your will and/or trust to remove your ex-spouse. You can then name someone else to inherit the property when you die.
Also pay attention to who you named as the personal representative of your will. This person is tasked with collecting estate assets, paying off your debts, and then distributing property. The personal representative also has to defend the estate in the event of a lawsuit. If you named your ex to serve as your representative, you should definitely change the designation to someone else.
Handling Gifts to Minor Children
If you name minor children as beneficiaries, a judge will need to establish a guardianship until they reach adulthood (age 18). This guardian will have the legal power to manage the assets you left to your children. When you die, the other parent is a natural choice to serve in this role, so you need to act if you are worried about your ex getting control of your assets in this way.
Our clients do have other options. For example, you could name another person to serve as guardian, but this also carries risks. The person you name might mismanage funds and waste assets before your children reach adulthood. This means there will be less money available when they are adults.
Another option is to create a Family Protection Trust and name it as the beneficiary. With this option, you get to pick the trustee who will manage the trust assets, and you can pick someone responsible. Many people choose a parent or sibling, but you can also pick a financial or legal advisor. A trust provides additional legal protection, since your children can sue the trustee for mismanaging funds.
Updating Powers of Attorney
A comprehensive estate plan should also include powers of attorney for medical and financial decisions in the event you become incapacitated. Many people name their spouse as their agent who will make decisions. Now that you are divorced, you should revise these powers of attorney so that you can appoint someone else.
Revising an Estate Plan after Remarriage
With divorce comes the prospect that you might remarry later. This choice will also have serious implications for your estate plan, so don’t forget to update it again should you take another trip down the aisle.
For example, your new spouse has a right to take between one-third and one half of your probated estate, regardless of what you state in your will. This is called the “elective share,” and you need to plan for it. You might find that your new spouse receives assets that you had earmarked for your children—and which they were counting on.
You can work around an elective share with a prenuptial agreement or trust, but you should meet with an experienced attorney first.