When Divorce Interrupts Estate Planning
Did you know that divorce rates for those over the age of 50 more than doubled between 1990 and 2010? This means that one in 25 couples in this age group are divorcing at a time in their lives when they likely never dreamed possible. It also presents a number of other important elements: what will your estate plan look like on the other side of divorce? What will your bank account look like? Your 401(k)? Your assets and properties? These are important considerations and ones that you’ll be addressing in both the divorce and your overall estate planning efforts. Whether it’s the baby boomers driving the trend or the fact that divorce simply isn’t seen in the same way it was fifty years ago matters little; there are long term considerations that must be addressed and handled.
Estate Planning After Divorce
Even as you’re dealing with the overwhelming reality of life as a single person, there are issues that will affect every aspect of your life. Here are a few:
Your home or homes: who gets what and then how do you divide it in your estate plan after the divorce?
What about your joint bank accounts? Odds are, your divorce attorney has already encouraged you to tread carefully. You have to consider what those balances are after you’ve divided assets.
Don’t forget the life insurance policies, 401(k) accounts and other retirement accounts. They have value and you’ll need to rethink your beneficiaries as well. The divorce does not automatically void designations on insurance policies, retirement accounts and more. In most instances, it only terminates a spouse’s right to inherit if there was no will.
You’ll also need to change your will, any trusts you’ve established and your powers of attorney, including your financial power of attorney and your medical power of attorney.
There’s also the matter of differentiating marital property from separate property. For instance, you might have bought a home before you met your husband. After you married, he moved in, and years later, you opted to take out a HELOC to make some home improvements. If his name is on the title, it’s now deemed marital property in most instances.
In recent years, there has been a move towards using irrevocable family trusts, both as a way to bypass the sometimes-awkward prenuptial agreement and as a way to protect some assets, such as a family home. The trust owns the home, versus the husband and/or wife. This is a great solution for some, but it may not be right for every situation. Legal guidance is crucial in these matters.
Any assets left to your spouse in your will are still fair game, so if you no longer want your wife to have your great grandmother’s diamond ring, be sure to change it in your will.
Of course, this is the tip of the iceberg, details matter. Be sure to keep your estate planning attorney in the loop so that he can best protect your interests moving forward. With a bit of planning, life after divorce doesn’t have to feel as though you’re starting over from a financial perspective.