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Estate planning after a divorce

While divorce can be a truly traumatic time for all of the parties involved, the need to ensure estate matters are dealt with correctly, can save further distress down the line.

Once the decision has been made to divorce, a host of further decisions and paperwork often follow, including custody issues with children and selling or refinancing the family home. Changes to estate planning are also vital. The majority of people would not want their ex-spouse to be the person to inherit their assets, but by overlooking estate planning changes, that is exactly what could happen.

One of the first things to update is the designation of beneficiaries. When a beneficiary is named on assets such as life insurance policies, health savings accounts, bank accounts or employer retirement plans, this will not change unless updated by you. With a simply form, the right beneficiary can be added.

Naming a trust as the beneficiary and selecting your own trustee is a popular choice. A trustee can be held accountable if trust assets are misused, and money is protected.

Tax-deferred savings are another consideration after divorce. Naming the right beneficiary is important for such accounts due to the potential tax consequences and the potential for long-term tax-deferred growth.

Updating your will or living trust is essential after divorce. This will prevent your ex-spouse, and his/her new spouse, inheriting your assets.

When it comes to health care powers of attorney and living wills, most married couples name each other as the person who will make healthcare decisions for them. A parent, close friend, sibling or adult child can be named instead, as most people would not want an ex-spouse to make decisions regarding life and death.

With regards to financial powers of attorney, most married couples name each other to make such decisions. The powers in regards to finance are far reaching, and the person has the ability to not only buy or sell real estate, but also to open and close financial accounts or collect government benefits. Again, a parent, close friend, sibling or adult child can replace an ex-spouse.

While the above covers the most important estate updates that need to be addressed after a divorce, it is always advisable to discuss such matters and individual circumstances with an attorney who has experience handling such matters. At Gray Legal, P.C., this is what we do.