Although it might seem counterintuitive, an ideal time to consider any potential changes to your estate plan is during a divorce. If you’ve gotten a divorce, it can be a key time to identify any potential holes in your plan that may have been created in the process.
The Effect of Divorce on Wills and Trusts
One important aspect of estate planning is the creation of a trust. A trust is a legal instrument into which the ownership of property can be transferred, after which a trustee manages the property for the benefit of a beneficiary. This is different than a will, which allows your beneficiary to receive the assets directly and have full discretion over how to use them.
You may have already established a trust during your marriage, perhaps for tax advantages or to create a clear plan in the event of divorce or death. During the divorce process, you’ll want to review the trust to see if it still reflects your desires.
You and your spouse could establish a revocable living trust for a child’s benefit. The trust can stipulate arrangements that should be made if certain events arise. For example, a new trustee may be named if one of the spouses dies while the trust is still in effect. The trust can also help determine how trust funds can be used, such as for the education and health of your beneficiaries.
Other Estate Planning Tools to Consider During a Divorce
Estate planning should include a periodic review of beneficiary designations on retirement plans and life insurance policies. These might need to be changed during the divorce process.
You may have named your spouse as the executor under your will, financial power of attorney, or health care power of attorney. These powers can be quite broad, and attorneys often recommend that those contemplating a divorce should remove the soon-to-be ex-spouse and appoint another trusted party. Instead of your ex-spouse, you can name a parent, sibling, close friend, or adult child.
Divorce can be painful and overwhelming, but an estate planning attorney can help guide you through the process – and ensure your assets will go to those you want to have them.