By Alexis Martin Neely

If you've already got an estate plan in place and you are going through a divorce, you've got some steps to take because no matter how you cut it, divorce has a major impact on your estate plan. I hate to tell you that because I know that the last thing you want to think about in the middle of your divorce is your estate planning and yet, it's critically important unless you want your ex to end up with control over all of your assets if anything happens to you.

Yep, that's what could happen if you don't address your estate planning as part of your divorce … your ex could end up with everything or at the very least in control of everything.

For most people going through a divorce, this is the last thing they want. It certainly was for me!

To make sure this doesn't happen, you need to revamp your estate plan and create a new Will, Trust, Powers of Attorney and Health Care Directives during your divorce and not wait until afterwards.

Revamp Your Estate Plan During Your Divorce Or Your Ex Could Get Everything (including control of your medical decisions!)

Here's the truth: if you are in an accident during your divorce, it's your soon to be ex who will be making  your health care decisions, who will be in control of your money, and will inherit everything if you die unless you have new documents drafted.

Your estate planning lawyer should be one of the first calls you make when you file for divorce.
 
While your divorce is pending, your estate planning lawyer can prepare a divorce Will (a temporary Will that ensures your soon to be ex won't inherit from you if you die), create a new Trust to receive the assets that you will receive after the divorce is final and update your health care directives and powers of attorney.  One thing to be careful of though is not to move any of your assets into your new Trust until after your divorce is final or until your divorce lawyer gives you the go-ahead.

Once the divorce is final and you know which assets you are receiving, you should then revisit your estate planning lawyer and get a new plan in place that will be established to cover what you have been given as part of the divorce and help you plan for your financial future.

Change Your Beneficiary Designations

You also want to make sure to review all of your beneficiary designations after your divorce. This is absolutely critical and often overlooked. And, you need to do it even if your divorce agreement says your ex won't receive any benefits. If you don't change your beneficiary designations, your agreement may be superseded!

There's actually a case pending in the United States Supreme Court right now about this very thing.  Husband and wife got divorced and husband never changed his beneficiary designation on his pension account.  Then, Husband died.  The pension administrator paid the benefits to his ex-wife, as indicated by the beneficiary designation.  Husband's daughter from a prior marriage sued for the benefits claiming that the ex-wife had given up her rights to the pension in the divorce agreement.  The first Court heard the case and agreed.  The appeals Court heard the case and disagreed, saying that the beneficiary designation trumped the divorce agreement. Now, the final answer will come from the Supreme Court.
 
You don't want to put your family through this. So update your beneficiary designations.

Review Your Life Insurance Provisions.

If you have any kind of a requirement in your marital settlement agreement that life insurance should be maintained on the life of either spouse for the benefit of the children, you should have this provision reviewed by your estate planning lawyer.

We've seen so many provisions like this that are just not well thought out. For example, a provision that says "Husband shall maintain life insurance having an aggregate death benefit of $250,000 for the benefit of the minor children" sounds great, right?  But, this is just the kind of provision that provides no protection for the minor children at all.

How long does the insurance have to be maintained?  What type of insurance has to be used?

Can Husband just get a cheap 1 year term policy that needs to be renewed each year?

What if he gets ill and becomes uninsurable? Who should be the beneficiary of the policy?

An effective provision should provide the type of insurance and the minimum length of time it must be in force, specific ratings requirements for the insurance company and whether the policy should be in trust or payable to a trust.  Your estate planning lawyer can help to identify these issues where even a very good divorce lawyer may overlook them.

Bottom line … your divorce has real, meaningful implications for your estate plan. I know it's not something you want to think about and yet if you don't, you and your family could end up very, very sorry you didn't.

© 2008 Alexis Martin Neely