For a wills and trusts attorney, the most common piece of advice for his/her clients is to review the estate plan every time there is a life-changing event such as a birth, death, marriage, and divorce. That advice is more crucial than ever in 2020, as these moments — particularly divorce — have intensified due to what has become the greatest life-changing event across the world: COVID-19.
In the first few months since the Coronavirus was declared a pandemic in the U.S., interest in divorce shot to 34% higher than in 2019, with 31% of couples citing irreparable damage to their relationships due to the lockdown.
But in 2020, there’s more than just the stress of legal battles, paperwork, and adjusting to a life without a former spouse (and the emotions that may come with it). An already contentious environment now has more complications because of COVID-19, such as unemployment, illness, homeschooling, and financial strain.
In the midst of it all, it’s common to forget one of the most important post-divorce practices: updating your estate plan.
Without a careful review of your estate plan following divorce, your former spouse may end up with something you no longer intend for him or her to have. It could be hundreds of thousands of dollars in retirement benefits, a holding in a real estate venture, or a priceless heirloom.
The following are some of the most common provisions to review following a divorce, but it is important to review your plan in its entirety with your estate planning attorney, as every estate plan is uniquely created for the individual who executed it.
Upon divorce, your ex-spouse is considered to have pre-deceased you when it comes to your estate plan. That means your ex-spouse should not receive any distribution from your will or trust. However, to make sure this provision works the way that it is intended, it is important to review all of your assets, including those that may not be in trust.
Many individuals remember to update their estate plans, but they forget to change the beneficiary on their work-sponsored retirement plans (including 401(k) and 403(b)) or IRAs. Naming beneficiaries on these types of assets essentially works as a contract between the owner and whomever is providing the insurance or retirement plan.
Naming a beneficiary directly on work-sponsored retirement plans or IRAs will control, even if there is an estate plan — so the ex-spouse may end up with these benefits even though he or she is considered pre-deceased for other estate plan purposes.
Other important elements of your estate plan to review after a divorce include those sections relating to your fiduciaries. These concern who is next in line as your Trustee, Personal Representative, Power of Attorney for finances, and Patient Advocate for healthcare decisions now that your ex-spouse is out of the estate planning picture.
Had you listed anyone else from your ex-spouse’s family as one of your fiduciaries? Do you still have at least three fiduciaries listed for each role?
Many individuals will list three to five fiduciaries in succession for each role, to ensure that someone is specified to handle the individual’s affairs even in the event of a common accident or some type of disaster.
After divorce, it is important to look at your succession of agents for each type of fiduciary role and ensure that there are still enough individuals listed, and that those individuals listed are the fiduciaries with whom you feel comfortable.
Similarly, it is important to review the sections of your estate plan relating to beneficiaries.
Do you still have beneficiaries listed other than your ex-spouse, and are those remaining beneficiaries the beneficiaries you still wish to receive both your personal property and the remainder of your estate, including money? Do you still have contingent beneficiaries in the case that your listed beneficiaries pre-decease you?
Taking the time to review the beneficiary sections of your plan will ensure that your estate goes to those whom you intend and does not go to anyone whom you do not.
Divorce is difficult without Coronavirus, and the last thing on many individual’s minds is updating an estate plan. It is, however, an essential step in ensuring that your wishes are still being carried out. To learn more about this, contact David B. Mammel at Chapman Law Group at (248) 644-6326.
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