How Divorce Affects Your Estate Plans
Divorce rates for people age 50 and older are rising. In fact, the divorce rate for people over age 65, nicknamed “gray divorce”, has almost tripled since 1990. Going through a divorce causes cataclysmic changes in every aspect of a person’s life, including where they will live and what possessions they will keep. Divorce even affects estate plans from the moment the divorce petition is filed until the ink dries on the final settlement papers.
Modifying Your Estate Planning Documents.
An estate plan is made up of documents that distribute an individual’s estate assets, provide critical information about desired medical treatment, and authorize agents to act as personal representatives. During and after a divorce, many details in an estate plan will change.
- Last Will and Testament. Spouses are usually mentioned in Wills signed by married couples. Sometimes a spouse will be named as the estate’s executor and may receive the bulk of the estate. Unless a divorcing couple plan to remain extremely friendly after the divorce, modifications are necessary.
- Durable Power of Attorney. This document authorizes an agent to act on an individual’s behalf. Since the agent for a married person is usually his or her spouse, this authorization can and should be revoked.
- Medical Health Care Power of Attorney. Typically, the principal’s spouse is named as the agent if the principal is incapacitated. The agent makes important medical decisions, so a new medical health care power of attorney may be prepared and signed.
- Living Wills. Similar to the medical health care power of attorney in that they both relate to medical treatment, a living will specifically lays out a person’s wishes for end-of-life care. Often, a spouse is given the authority to carry out the Principal’s wishes. Again, this document can be revoked and updated with a document that better suits a person’s current life.
- Trusts. Any trusts prepared by either person in the marriage should be reviewed for changes, especially if the ex-spouse is a trustee or beneficiary.
Remember to Change Beneficiary Designations.
Most retirement accounts, bank accounts, and life insurance policies allow the owner to name beneficiaries so the accounts transfer to them upon the death of the owner. Updating these beneficiary designations immediately removes the risk of forgetting to change them later.
Divorcing? Act Now.
It’s sometimes recommended that couples who want to divorce change their estate plans twice – once when the petition is filed and again after the decree is signed. So many things must be considered when getting divorced, especially as a current or soon-to-be retiree. As soon as divorce is imminent, remember to review your estate plans.