A divorce often requires changes in relationships and finances. Ending a marriage should also include estate planning changes so that the estate is managed in accordance with a person’s wishes after they die.
A will and trust will likely need to be revised to remove the former spouse as a recipient of assets, executor and trustee. Otherwise, the former spouse may receive assets after death and exercise control over the deceased’s estate or trust.
Guardianship of the couple’s children may need to be reconsidered in some cases. Ex-spouses are often named in the will as their guardian or a court may appoint them in the absence of this designation. However, if there was a bad divorce or a former spouse has a substance abuse problem, someone else should be considered as guardian. When this occurs, cash could be left in a joint bank account with the newly-named guardian for guardianship litigation.
A trust should also be created for minor children. Otherwise, the former spouse may end up controlling their finances. A revocable trust may be established naming a trustee to control these funds on the children’s behalf.
A spouse may need to update a health care proxy that allows them to designate another person to make medical decisions. Unless this is changed, a former spouse may decide these issues if a person becomes incapacitated.
Likewise, a power of attorney grants a wide range of financial and business authority to the designated agent, especially if a person becomes incapacitated. Without changes, a former spouse may continue to hold these important powers. A revised power of attorney should be executed which names a friend, relative or other trusted advisor as an agent over personal property and other assets.
Beneficiary designations need to be updated on retirement plans. These should be revised to remove the former spouse as an unintended beneficiary. If the former spouse is intended to remain as a beneficiary, a new designation should be executed and dated after divorce.
Life insurance requirements must also comply with the divorce decree. A spouse may not remove any obligations to keep insurance and having a spouse as beneficiary if this required under the decree.