Question: I was recently divorced, but my estate plan names my former spouse in a few places. What should I do?
Answer: Revise your estate plan! You should always think about updating your estate plan when a major life event happens. Divorce or legal separation from your spouse is one of these events. There are probably a number of places in your current estate plan that name your former spouse. These are the areas that you should consider updating:
- Incapacity planning. Who did you name as your agent under your healthcare power of attorney or financial power of attorney? If you were to become incapacitated, your current estate plan probably says that your spouse should make all of your healthcare decisions and should have the ability to access your finances and make financial decisions. Since you probably do not want your former spouse to make these decisions for you, consider changing your healthcare agent and financial agent to someone like a trusted friend or family member.
- Inheritance planning. Your current estate plan probably states that if something were to happen to you, all of your assets should go to your former spouse. After a divorce, you probably don’t want your former spouse to inherit everything. As such, you should change the primary beneficiary of your will or trust.
- Life insurance. Your current life insurance policy might name your former spouse as the beneficiary of that policy. Talk to your life insurance company about updating the beneficiary designations on the policy. Another life insurance issue could arise if your divorce settlement requires you to maintain life insurance for your children. If so, you should consider creating an irrevocable life insurance trust which will ensure that the life insurance benefits are properly transferred after the divorce, and protect the benefits from future events and estate tax issues.
- IRA and other accounts. When you set up your IRA, you had to designate one or more persons to be the beneficiaries of that account should something happen to you. If you set up the account while you were married, you might have listed your former spouse as the beneficiary. Contact your IRA company to update the beneficiary designations on your account. Also, if you set up your bank accounts with a “pay on death” designation, be sure to update these designations as well.